Original: Jordi Alexander, Founder of Selini Capital
Translation: Yuliya, PANews
After the largest single-day market cap increase in history, just a day later, the market faced the second-largest single-day drop in history. Such extreme volatility has caught market participants off guard.
Many traders have suffered significant losses in this environment. On one hand, due to panic or technical breakdown signals, they cut losses at the market bottom; on the other hand, driven by a brief market rebound or positive news, they blindly chase prices at the top, ultimately facing a second market crash.
In the bull market of November 2024, the market expanded rapidly, and most investors tended to go long, making it relatively easy to profit. However, in the current market characterized by extreme volatility, relying solely on luck makes it difficult to achieve long-term profits. Only investors with highly specialized trading strategies can survive in such extreme environments and may profit from them. They typically adopt the following strategies.
Cash is King, Liquidity First
In a highly volatile market, holding sufficient cash is crucial, even if it means sacrificing some expected returns (EV) to ensure liquidity.
Take the investment management firm Jane Street as an example. This firm has long invested in deep out-of-the-money put options, even facing continuous short-term losses. However, during a market crash, its ample liquidity allows it to acquire undervalued assets at low prices. Compared to traditional financial markets, the prevalence of leverage in the crypto market is higher, and liquidity mismatches are more severe, making this strategy particularly important.
Some top traders tend to gradually reduce their positions in the "shoulder" area during sharp market rallies, rather than waiting for the extreme peak in the "head" area. Although they may miss some upside in the short term, this strategy allows them to recoup funds and improve their ability to re-enter at more attractive price levels, which is advantageous in the long run.
Focus on Price, Not Time
Top traders typically do not limit themselves to trading time frames but define trading ranges based on price. For example, during the last bull market, trader High Stakes Capital shared a screenshot of an eight-figure profit from his FTX account, with positions built just two months prior. This indicates that in extreme market conditions, time is not a key variable; the core lies in clearly defined buy and sell ranges.
Trading logic should be based on the following two points:
Identify buy prices with clear value support to avoid decision-making influenced by short-term fluctuations.
Set clear risk-reward ratios and target exit prices, executing trades decisively when the market reaches the target.
Then, maintain patience, whether it takes hours or weeks; as long as the price reaches the target, execute the trade. At the same time, continuously adjust your "ideal entry price" and "ideal exit price" based on market changes.
If one is too fixated on the time dimension, such as "only day trading" or "only holding for several weeks," trading performance is bound to be limited. The core mindset of top traders is: "Buy low, sell high," and the holding period is determined by market fluctuations.
Calm Execution, Strictly Follow Trading Plans
In extreme market environments, position sizes must match one's financial strength. If the position is too large and the market continues to decline, traders may experience psychological imbalance due to unrealized losses, leading them to deviate from their original plans.
The current market still possesses many positive factors and ample liquidity, making it difficult to enter a prolonged multi-year bear market. This macro judgment allows some investors to maintain confidence even during market downturns. At the same time, they do not expect a full-blown "altcoin season," so they gradually take profits during market upswings and patiently wait for the next more attractive entry opportunity.
In market decision-making, some investors adopt a psychological strategy when deciding whether to sell, asking themselves: Is there a high probability that the current price will fall again? If the answer is yes, it indicates that this point is not the best entry opportunity, and it is advisable to remain on the sidelines, waiting for a better risk-reward ratio window to appear.
Market Practice: Trading Strategies in a Volatile Market
Taking Bitcoin as an example, when the price falls from $100,000 to $90,000, some traders begin to build positions in batches. They gradually buy in the $90,000 range, reaching their expected position size at $82,000 and are willing to hold for a longer time.
However, the market further dips to $78,000-$79,000, and short-term unrealized losses expand. But from a risk-reward perspective, the investment value at this price level actually increases, so some investors choose to free up additional funds to increase their positions rather than passively stop-loss, provided they do not believe the market will enter a long-term bear market based on long-term market structure analysis.
Ultimately, the average holding cost decreases to $83,000-$84,000, and if the market recovers to $100,000, it will yield a relatively ideal return.
As the market rebounds, the bottom position at $78,000 is partially taken for profit at $85,000 to ensure there are still funds available to respond to a potential second pullback. Meanwhile, most core positions are still held as planned.
If the market does not provide a second pullback opportunity and rises directly, then all profits are taken in the $87,000-$93,000 range, waiting for the next ideal entry price. If the market breaks through $95,000 but does not pull back to $88,000, then adjust the expected entry point to $90,000. When the market falls back to $90,000, buy in batches again and adjust strategies based on market trends.
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