In fact, your husband is not obsessed with cryptocurrency trading, but gambling. This is gambling addiction, not the so-called cryptocurrency trading. Cryptocurrency trading is often misunderstood, so it has a bad reputation. People naturally think. Cryptocurrency trading = gambling. Many people lose money in the cryptocurrency circle. They regard the cryptocurrency circle as a casino and themselves as gamblers who think they are lucky. Because they must have heard of people who made a lot of money here, or they have seen people around them get rich because of cryptocurrency trading. But they don’t know how they got rich, how they made money, whether it was based on luck or what they bought, and when they bought it. They didn’t understand how long they held it, but they decisively concluded that the cryptocurrency circle could make them rich. This is the biggest fallacy, so they came to this new circle with the dream of getting rich. In fact, it’s just a change of soup but not medicine. It’s just that a gambler changed a casino to play a game of guessing whether it will rise or fall. How can you not lose money?
The madman has unconsciously been in the cryptocurrency circle for nearly ten years. From spot to contracts and then back to spot, the experiences have been quite rich. Today, I will talk to everyone about contracts. When I first got in touch, I didn’t understand anything; I only knew about opening and closing positions, didn’t set stop-losses, and had no logic, just traded based on feelings. When luck was good, the account would rise quickly; when it wasn’t, I could only recharge USDT. Often the price didn’t change, but the money was gone. So I learned various things and understood more and more. However, the more I understood, the more confused I became with all kinds of indicators and data, and I could no longer tell what standard to use for judgments. After a long period, one day I suddenly realized.
Tonight, the topic shared by the madman is the management of trading positions. Whether it's spot or contract trading, how to manage the position directly determines your risk control level, holding average price, and the final profit size. This can be considered the most important point besides direction and mindset. Without further ado, let's get started.
What is position management?
Position management refers to the comprehensive management of setting plans for building positions, increasing positions, reducing positions, and how to clear positions when you decide to enter the market. Good position management is one of our important means to avoid risks, minimizing losses and maximizing profits!!
So what is a position?
Position refers to the ratio of the total amount you use for trading to the amount of funds you have already completed in transactions.
For example, if you have 100,000 yuan for trading and have already used 30,000 yuan to buy coins, your position is 30%, which is 3 layers of position. This behavior of buying is called opening a position or building a position.
If the purchase uses half of the total funds, it is called a half position. If the purchase funds account for a small proportion of the total funds, it is called a light position. If it accounts for a large proportion, it is called a heavy position. Re-buying after establishing a position is called increasing the position. Selling part of the position is called reducing the position. The act of selling everything is called clearing the position. Holding temporarily.
Not selling is called holding a position. Always keeping a portion of the position without operation is called a base position. Once sold completely, no further purchases are made, which is called an empty position.
The above are the corresponding terms related to position management.
Position management is part of the entire trading system. Different market conditions have different trading strategies, so the methods of position management under different strategies are also different. However, regardless of the method, there are a few basic principles. Especially in unstable market conditions, full position operations can lead to a passive situation if a drop occurs, making it difficult to buy or sell. Selling would incur losses, and if not sold, there would be no extra funds to increase the position and dilute costs. When other market conditions arise again, there may be no funds available to utilize or may have already suffered losses and exited. Holding a full position can lead to a psychological imbalance due to market fluctuations. The greater probability of full position operation is liquidation rather than.
The fantasy of getting rich overnight.
First: Do not operate with a full position; always maintain a certain proportion of reserve funds: full position operation is like going into battle without backup troops - a key point.
Second: Buy and sell in batches to reduce risks, dilute costs, and amplify profits. The advantage of buying in batches downward and selling in batches upward is that your average price is lower than others, leading to higher profits.
Third: When the market is weak, one should hold a light position; during a bear market, it is best not to exceed half a position. During a strong market, one can hold a heavier position. In a bull market, it is recommended to limit the position to 8 layers, with 20% left for short-term or reserve funds to deal with unexpected events.
Fourth: With changes in the market, appropriate position adjustments should be made, with appropriate increases or decreases in positions.
Humans are alive; when the market is strong, I can appropriately reduce my position to capture some profit. When it is weak, I can appropriately increase my position to lower costs. This is making corresponding adjustment actions. After increasing the position, a slight rebound in price will be very close to or exceed the cost. For example: when the trend is clearly downward, one should reduce the position. When the trend begins to stabilize and rise, one should increase the position. When there is uncertainty about the market or it is not understandable, do not heavily invest or easily increase positions. When seeing support, one can increase positions; when seeing pressure, one can reduce positions and realize profits.
Fifth: During a sluggish market, one can temporarily hold an empty position to wait for opportunities.
At the end of a bull market or the beginning of a bear market, or before the bottom stabilizes, one can temporarily hold an empty or light position to wait for opportunities. However, as long as you want to continue fighting in this market long-term, don’t hold an empty position for too long. Long-term inactivity will gradually lead to a loss of sensitivity to market changes, and to your trading instincts. Alternatively, you can operate in a bear market with a small amount of funds, summarizing experience and skills to train your trading sense. Bear market operations can be arranged during the end of a bull market or the beginning of a bear market. This point is very important.
Sixth: Changing positions: retain strong coins while selling weak coins.
Whether the market is rising or falling, as long as there is volatility, it is a good market. With volatility comes opportunity to make money. If a coin stays flat for a long time or has a small range of fluctuation, one needs to flexibly change positions. One should not fall in love with a particular coin but rather make rational choices. Seize opportunities in other markets.
The above six principles apply to both spot and contract trading.
Let’s talk about the methods of position management, which is batch operations.
Batch operation refers to dividing the invested funds, conducting batch building, increasing, or reducing positions. Batch operations can be completed within a day or over a period of time.
Why do these actions? Because the cryptocurrency market is unpredictable, both upward and downward movements are highly probable events, and no one can accurately predict short-term price fluctuations. Therefore, it is necessary to leave enough funds to cope with unpredictable fluctuations.
If one operates with a full position without sufficient confidence, once the market changes in the opposite direction, it will lead to huge losses. Therefore, using a batch method can reduce the risk of full investment and dilute costs, serving as the basis for cost reduction and profit amplification.
Next, let’s talk about how to operate in batches: divided into equal batch and non-equal batch.
First: Equal distribution, also known as rectangle trading method, means dividing the funds into several equal parts, buying or selling in sequence, with the same proportion of funds in each transaction. Typically, 3 or 4 equal parts are used. For example, first buy 30%, and if you start to profit, buy another 30%. If there is no profit, do not intervene with new funds temporarily. When the price of the coin reaches a certain high point or the market changes, gradually reduce the position and sell.
Second: Non-equal distribution, which refers to buying or selling funds in different ratios, such as 1:3:5, 1:2:3:4, 3:2:3, etc.
Formed shapes based on proportions include: diamond, rectangle, hourglass, etc. The commonly used method is the pyramid trading method.
Third: Compare the same amount of funds and the same position using different methods.
Pyramid: buy 5 layers at 1000, buy 3 layers at 1100, buy 1 layer at 1200, average price 1055.
Inverted pyramid: buy 1 layer at 1000, buy 3 layers at 1100, buy 5 layers at 1200, average price 1144.
Equal parts rectangle: buy 3 layers at 1000, buy 3 layers at 1100, buy 3 layers at 1200, average price 1100.
The price rises to 1200 with profits: pyramid 145, inverted pyramid 56, rectangle 100.
When the price drops to 1000, the losses are: pyramid +55, inverted pyramid -144, rectangle -100.
Through comparison, it can be seen that the pyramid type has the least cost and greater profits when prices rise. When prices fall, it bears more risk.
The inverted pyramid is just the opposite. If the price drops to 1000, the inverted pyramid loses 144. In actual use, it is more reasonable to adopt a pyramid method when buying and an inverted pyramid method when selling.
The above comparison clearly demonstrates the role of position management. When the price of coins drops significantly, and we are unsure if it has reached the bottom, if we buy at this time, we fear being trapped if it continues to fall. If we don’t buy, we worry about missing out on a rebound. In this case, we can use the pyramid building method.
For example: If a certain coin drops to 10 yuan and you buy 20% of the position, then if the price drops to 8 yuan, you enter another 30%. At this point, the average cost is 8.6 yuan. If the market continues to drop to 5 yuan and you enter another 40%, the average becomes 6.5 yuan. If the price rebounds to 6.5 yuan, it is break-even. If it rebounds to 10 yuan, you have made a profit of 3.5 yuan. But if you bought a full position at 10 yuan, when the price returns to ten yuan, you have just broken even.
During the price rise, the lower the price, the larger the position should be. As the price gradually rises, the position should gradually decrease. This method of buying belongs to right-side building. Such costs are relatively safe; even if the market drops, as long as it hasn't broken the holding cost, there's no need to panic.
This method has a heavier initial position, so the requirements for entering the market for the first time are relatively high. It requires some grasp of market fluctuations and is suitable for technical players.
The inverted pyramid selling method is the opposite of the pyramid. It has a wider top and narrows downwards, resembling a funnel. When the price of coins rises, the number of coins held gradually decreases, meaning the quantity of coins sold increases as the price rises. This is the method for reducing positions or clearing positions.
The core of position management consists of the above points. Once understood, I believe that in the future, whether opening a position in spot trading or contract trading, you will have a clear idea.
Finally, I will discuss a few personal suggestions for making good trades.
First: Technical aspects, including technical indicators, K-line shapes, trading volume, trend judgments, distinguishing between bull and bear markets, grasping buy and sell points, judging support and resistance, and utilizing volume-price-time-space.
This varies from person to person; some people don’t understand technology and have no interest, so there’s nothing that can be done.
Second: Fundamental analysis, including related macroeconomics, policies, regulations, and the project itself, etc.
Third: News, both positive and negative. Operations should be conducted under favorable news and fundamentals.
Fourth: Time cycles, intraday short-term, medium-short term, medium-long term, long-term (trend trading), confirming trade cycle consistency. For example, in long-term trading, do not frequently engage in short-term buying and selling. In long-term trends, adjustments and fluctuations in between are acceptable as long as there is enough space, and the assets are mainstream coins; the price will rise again.
Fifth: Mindset control, remember not to shake back and forth. Once you have a plan, implement it; don’t compromise.
These are all personal insights and experiences. What you learn becomes yours; if you can’t learn it, there’s nothing that can be done.
Two key points: First, the methods and functions of position management; second, personal insights from financial brother.
Message: If you have just entered the market, come to me, and I will teach you to learn while operating. If you are already in it and it’s not ideal, come to me, and I will help you; I won’t let you keep making mistakes. If your position is trapped, I will provide a reasonable solution based on your entry point. Because everyone’s trapped positions are different, the methods for resolution will also vary. Some methods are suitable for conservative traders, while others are suitable for aggressive traders. I will certainly use the most appropriate methods to genuinely solve your problems and assist you in exiting.
