There are five issues that need to be addressed in the crypto trading system:
①What to buy
②When to buy
③How much to buy
④When to sell
⑤How much to sell
Among them, the key to what to buy lies in how to choose a potential target, and the key to when to sell lies in how to stop profit. Jiuge talked a lot about these two issues.
How much to buy is related to the issue of position management. This is also a core issue! As I usually say: 50-60% of the position is mainstream, 30% of the position is for copycats, and 10% of the position is for contracts. This method may not make you 10 times or 100 times. But let's take a look at how many people really make money in this bull market? The ultimate reason is position management.
As for when to sell and how much to sell, this can be executed according to the specific planning of the position.
So what exactly is position management? Are there any tips for doing position management well?
Three position management methods
01
First, the rectangular position management method.
This method refers to dividing all positions into equal parts, with each position having the same amount. Common position ratios include three equal parts, five equal parts, or even ten equal parts.
This method is more suitable for a volatile market. If we cannot judge whether the market will be in an upward or downward trend in the future, we might as well gradually share the risk by adding positions in batches with a fixed amount.
02
Secondly, the funnel-shaped position management method is also known as the inverted pyramid management method.
As shown in the figure, this method divides the position into five parts from bottom to top, namely 10%, 15%, 20%, 25% and 30%.
So when is this method more appropriate? If we judge that the market will continue to fall for a long period of time in the future, then this method may be worth trying.
In the early stage of market decline, we use this method to enter the market. Because the initial amount of funds is small, we will also reserve sufficient chips for subsequent positions.
For example, the current net value of BTC is 65,000. We set the increase in position to $10,000 when the net value drops by 10%; when the net value drops by 20%, we increase the position by $20,000. If the market continues to fall, we continue to increase the position by $30,000 until the net value rises.
In summary, this method is suitable for left-side trading, which is simply the process of bottom fishing, and what is obtained is the main upward wave that may appear in the future.
Here Jiuge wants to remind you that since we don’t know when the real bottom will come, we must remember that the interval between each replenishment cannot be too close, otherwise our ammunition will be used up before the market bottom comes. The key to this method of adding positions is to manage the subsequent funds well.
03
The last one is the pyramid position management method.
This method is exactly the opposite of the above content. It emphasizes investing a large amount of capital when initially building a position, and continuously reducing the proportion of increasing positions as the market rises.
This method is also called right-side trading. It involves intervening when an upward trend has been formed and making profits by following the trend. It is suitable for use when the market conditions are good.
For example, when the bull market starts, we need to use sufficient chips to lay a solid foundation for ourselves, and the subsequent 30% or 20% increase in positions is to cover the positions out of a cautious attitude.
As the old Wall Street maxim says:
"In a bull market, the most important thing is to hold chips until there is a significant reversal signal."
Summarize
After talking about these three position management methods, which one is better?
In fact, the market is changing rapidly. These three methods themselves are neither good nor bad. What is important is that we should choose the appropriate method of adding positions based on our own judgment of the market.
Just like what Jiuge likes very much:
The essence of investment is actually a realization of one's own cognitive ability.
Finally, Jiuge still wants to remind you that no matter which position management method we adopt, we must keep a certain proportion of liquidity in our account so that we will not lose the right to choose.
At the same time, we should also remember that a good method of adding positions does not require a fixed method, but rather adopts the most suitable method as the market changes.
Investment comes from life and is a part of our lives. We can understand the true meaning of life from investment, and we can also summarize the laws of investment from life.
Most of the reasons why the public fails in investment are: insufficient execution, lack of patience, emotional fluctuations, lack of belief in victory, etc. These shortcomings can be seen everywhere in life. What you need to learn in investment is not simply how to make money, but to correct your own wrong habits and ideas, cultivate your own virtues, and carry money on this basis.
Successful investors are calm and composed. When we give up all kinds of desires, they can no longer control us, and we gain true freedom of body, mind and finance.
"Going all in" is not true bravery, and "holding light" is not great wisdom. Those who have the ability to control their positions are the ones who are truly strong in their hearts.
Position management can be simply summarized in one sentence: don’t increase leverage easily, don’t fill up your position easily, and don’t go short easily.
