【The Way to Trade Derivatives: Risk Control is King, Discipline is the Foundation】

Many people envy those stories of short-term wealth, but they don't see the countless bodies of margin calls behind them. Having been in this market for many years, I’ve seen too many use leverage to wipe out their principal. Conversely, I’ve also seen traders turn deep losses into profits through strict risk management. It’s not some mystical secret; it’s simply discipline.

In my early days, I started with 8,000 yuan. I know very well what despair feels like during that period. After consecutive margin calls to that extent, you’ll thoroughly reflect on what you did wrong. Later, I gradually developed a trading framework that doesn’t rely on fancy indicators. The core goals are: stay alive, make money, and avoid crashes. From negative assets to growing the account, with monthly returns stabilizing at a certain level, it all comes down to these 8 principles.

**First: Treat funds as bullets to allocate**

Divide the total capital into 5 parts, using at most 1 part per trade. Set a stop loss at 8%, so the maximum loss per trade is 1.6%. It may seem that taking profit at 15%+ offers less favorable odds than legend suggests, but as you keep reading, you’ll understand—successful traders operate on this logic. They don’t bet everything on a big move; instead, they use small losses and big wins to snowball through compound interest.

**Second: The trend is always the top priority**

During bear market rebounds, you see “bottom-fishing” everywhere, but that’s often a trap before the next decline. Conversely, the real opportunities are during bull market corrections. Trade in the direction of the larger cycle to earn predictable profits; trading against the trend is purely luck-based. When mainstream coins like AVAX show consistent direction on daily, weekly, and monthly charts, that’s when you should bet big.

**Third: Don’t envy coins that surge wildly**

Coins that skyrocket on the chart often face dumps after a period of sideways consolidation at high levels. Many hold onto the “I won’t sell” mentality, standing guard from the peak to the bottom. At such times, it’s not about “firm belief,” but about probability. Profits at high levels are already secured; the chance of a downturn is greater.

**Fourth: RSI indicator as a reference for entries and exits**

Consider entering when RSI crosses upward in oversold territory (RSI＜30), and exit when RSI crosses downward in overbought territory (RSI＞70). This indicator isn’t magical, but it’s simple and effective. When combined with trend analysis, it helps you avoid obvious high-risk positions.

**Fifth: Stop-loss with conviction, add positions prudently**

Many lose money but refuse to cut losses, instead doubling down and holding on for dear life—this is a common route to bankruptcy. Conversely, they become overly cautious after profits, fearing to give back gains. The correct approach is: accept losses when they happen, cut when necessary; after profits, consider adding to positions to let your gains work for you. But adding positions carries risks, so it ties back to the first principle of capital management.

**Sixth: Volume can distinguish true breakouts from false ones**

Accumulation with high volume at low levels followed by a breakout is a genuine breakout—trade accordingly. Conversely, shrinking volume at high levels with stagnation indicates risk accumulation; be cautious. Volume reflects market participation and tells the real story.

**Seventh: Upward waves across different cycles are the right path**

For coins like ADA, short-term traders can catch daily upward moves; swing traders can position during weekly rises; monthly uptrends indicate medium-term trends; quarterly rises are the real long-term bull. Different traders operate on different cycles, but the key is not to go against the trend. I’ve seen too many get caught in a downtrend on the monthly chart while trying to rebound on the daily, ending up trapped.

**Eighth: Review is the trader’s cultivation**

After each trade, review thoroughly. Why did you enter? Why did you exit? Where was your judgment biased? How can you improve next time? This iterative methodology sharpens your market intuition over time. Traders who stubbornly ignore advice will eventually face account issues.

In short, surviving in the derivatives market itself is a victory. Stories of huge gains followed by huge losses often stem from neglecting risk management. What I share isn’t some secret recipe; it’s basic skills that everyone who survives understands. It may not be the fastest way to get rich, but it’s the logic that allows you to survive long-term. The market is always there, opportunities are always present—what matters is that you stay alive until that opportunity comes.