When trading in the cryptocurrency circle and managing positions, we must first know the purpose and significance of warehouse division and the impact it has on our transactions. Then we must understand when warehouse division is applicable and when to avoid warehouse division as much as possible so that we can better control the positions.
1. What is position management?
Position management refers to a strategy to reasonably allocate and control investment positions based on personal risk preferences, market conditions, actual capital conditions, etc. The purpose of position management is to maximize the risk-return balance of the investment portfolio.
2. Two basic principles of position management
Position control and position allocation are two basic principles of position management. Position control refers to limiting the maximum amount or maximum proportion of a single purchase to avoid sudden investment risks and diversify investment risks. Position allocation is to accurately allocate funds according to the risk level of different sector concepts and different currencies, contracts, spot, leverage, and financial management to achieve differentiated risk diversification.
3. Three Position Management Methods in Cryptocurrency Circle
There are generally three methods of position management: fixed position method, fluctuating position method and balanced position method. Fixed position method is to fix the investment position at a certain ratio, such as 10% or 20% of the total funds. Fluctuating position method is to dynamically adjust the position ratio according to the fluctuation of the currency market price. Balanced position method is to evenly distribute funds to different varieties or currencies to achieve balanced risk dispersion.
4. The main purpose of the warehouse splitting technology currently used by individual investors is to use the warehouse splitting technology to solve the problems of buying and selling points:
Buying point:
During the process of building a position, we often find that the market usually has a compensatory decline (compensatory rise) behavior. For example: you originally decided to go long at BTC 60,000 U points (60,000 has important support), but BTC stayed at 60,000 points and then fell by 3,000 U. At this time, we have lost 25 points (reaching or approaching the peak of the stop loss). There will be two choices in front of us:
Option 1: Stop loss and look for a better opportunity to enter the market. (The advantage is to exit and wait and see; the disadvantage is that the market itself is close to the reversal area at 60000U. After the decline, the market is easy to start. Exiting at this position basically means: 1. Stop loss on the previous order; 2. Give up the long order at this position. One loss, one missed opportunity).
Option 2: Covering the position, lowering the price cost makes it easier to make a profit, and at the same time you need to find a new stop loss position. (The advantage is that if the cost is lowered and the price rises slightly in the future, it is easy to make a profit. The disadvantage is that if you lose after covering the position, it is generally quite heavy.) [Note: The covering position here requires a clear division of positions: for example: we have 20,000 funds, 10,000 funds can be used for trading, and the remaining 10,000 is used to resist market risks and must not be used. When BTC reaches 60,000 U, we can buy 50% of the position. If the market starts, look for opportunities to add 10% (10%) of the position at the confirmed start position (add positions on the right side of floating profits). At this time, we are trading with 60% of the position. If the market falls, we can add 10% to 20% in a stable position (depending on the safety level at the time) to lower the cost. So covering the position is not about covering it when you have money, but you have a very comprehensive assessment and division of funds and know how to use them yourself. 】
Selling Points:
I won't talk about the stop loss technique for now. The benefits of splitting positions in the selling point are: 1. You can have a profit that is safe; 2. At the same time, you can also keep some positions to gain a higher profit margin. (Just like we said that some people can get 1000-2000 points. Of course, you can get this profit. Splitting positions is just one of the branches. You also need to have good analysis skills for the operation of the market).
The market space is actually divided by important resistances, and these important dividing positions are the key positions of each wave of operation targets. If they break through, there will be more space, and if they do not break through, the market is basically set. Therefore, usually when we reach the first key resistance, we will do the first reduction in positions (the amount needs to be assessed according to the risk level of the market at that time), and then observe the repeated trend at this position. If the market is unable to break through, we will completely clear the position. If the market is expected to break through, we will hold the remaining positions and continue to look for the next big space.
From the above content, it is not difficult to see that sub-warehouses are of great importance to personal transactions, but there are some situations where they cannot be used. Therefore, for sub-warehouses, we briefly mention a few important points that need to be paid attention to:
1. Small funds are not suitable for split positions. Small funds have weak purchasing power and need more funds to resist risks. If you split positions, you will increase the investment in positions, reduce the ability to resist risks, and may even affect your mentality. Therefore, it not only affects the ability to resist risks, but also disturbs your mentality. Generally speaking, if 20% of the total funds cannot buy more than 2 contracts, it is not recommended to split positions forcibly.
2. It is not suitable to split warehouses without a perfect split warehouse strategy. Splitting warehouses is a branch of the fund management module in trading. It is not simply understood as buying 1 lot first and then buying 2 lots. It requires a complete layout concept, layout ideas and technology. Therefore, it is not suitable to force split warehouses without a complete split warehouse strategy, otherwise it will only increase the position and increase the loss amount, but will not achieve the expected increase in profit probability and profit space that we want.
3. If the market analysis technology is not up to standard, it is not recommended to split the warehouse. The technology of splitting warehouses requires a high level of understanding of market trends, strength, resistance, and operating rules. Without a corresponding high level of market cognition and analysis, most split warehouses will increase risks. Therefore, if the technology is not up to standard (corresponding analysis accuracy), it is not recommended to split the warehouse.
6. Next, let’s talk about the situations in which it is not suitable to split positions in the market trend:
1. You can split your positions according to the market trend;
Let's take a simple example to understand: Take the rise as an example, go long during the rise, and go long on dips in most callbacks. But during the callback process, sometimes the adjustment is at 0.382, and sometimes at 0.5. But no matter where the market adjusts, the probability of going with the trend is very high. So we can use the method of splitting positions to intervene at key resistance positions. If the market falls, we can split positions to share the cost. Since the upward trend is good and the probability of continuing to rise in the future is high, the risk of splitting positions is reduced, and we can also grasp a corresponding low position accordingly.
At this time, we need to have a good judgment on the development status of the trend, otherwise, when the upward trend has obviously disappeared, we still think that the upward trend is good. This is when big problems are likely to occur.
Secondly, in determining resistance, not all resistance in the market is a buying point, only key resistance is. If you split positions at every resistance, it is definitely wrong. Therefore, you can only split positions at key resistance, not at every resistance.
2. Try not to split positions during the turning stage of the market;
In the turning stage, the market is reconstructing new rules. At this time, many resistances will be constantly broken and penetrated. Before the new trend is reconstructed, there are many interference factors in the market, which will affect stability. Forcible position splitting will only increase the risk level. (Note: It is not that position splitting is not possible, but the risk of position splitting is increasing. The core of trading is to make profits within controllable risks. Uncontrollable risks are gambling, so position splitting is not recommended).
3. In the initial stage of market volatility, positions can be divided;
Here we talk about the possibility of position division in the volatile market, but please note that it is the early stage of the volatile market, not the late stage. The early volatile market is generally the resonance resistance of 0.618, 0.786 or the previous high and low of the adjacent band. The relative regularity is strong, and the stability of position division is greatly improved. However, at the late stage, the market began to frequently break the existing volatile rules (the reason for breaking is that the volatile market has entered the late stage and there is interference from new forces), so the stability is weak and the risk of position division is high.
4. Try not to split positions in the late stage of market volatility;
This is an extension of the previous question. The end of the shock is equivalent to entering the turning stage, so it is not clear whether it will turn up or down. If the position splitting is wrong at this time, the trend of the successful market turn is usually fast and large (you can observe the market trend at the moment when the shock is broken), so the loss faced by the position splitting is relatively large, so it is not recommended to split the position.
3 common position management techniques:
1. Rectangular position management
The rectangular position management method is the most commonly used position management technique. The half-position and one-quarter positions we often talk about are typical rectangular position management methods. I believe that friends all understand this. The so-called rectangular position means that the amount of funds entering the market at the beginning accounts for a fixed proportion of the total funds. When opportunities arise later, the position will be increased according to this fixed proportion.
The advantages of this operation: On the one hand, if the price of the currency falls, the position will not be completely trapped, and stockholders can use the position increase to dilute the cost, greatly reducing the risk. On the other hand, if the stock price rises directly as expected, there is still room for profit if there is a certain proportion of the position in it, and you can also increase the position in time during the adjustment process, holding the initiative in your own hands.
2. Pyramid Position Management
When coin friends hear the word "pyramid", they probably know what it means. Pyramid position management means buying heavily when starting to build a position. If BTC rises in the future, add positions in sequence, and the proportion of each increase decreases; if BTC does not rise but falls, do not add positions.
Since the proportion of opening a position is greater than the proportion of adding a position, this operation not only increases the profit margin, but also increases the risk of loss. If you are very confident in your prediction, you can use this method to buy. As long as the price of the currency moves according to your expectations, you will definitely make more money than a rectangular position.
3. Funnel-shaped position management is the opposite of pyramid-shaped. When building a position, buy with a light position. If BTC falls in the future, gradually increase the position. The proportion of each increase will increase, thereby diluting the cost.
This method is suitable for when the market fluctuates. In order to reduce the risk of loss, the proportion of early position building is relatively small. If the price of the currency falls, the position will be increased, so that it is easy to recover the investment. Of course, the profit margin will also decrease when the price of the currency rises.
The following figure is the early trend of BTC. Due to the large increase in the early stage, the price of the currency faces the risk of correction in the short term. If you buy at 60000U, in order to reduce the risk, you can use funnel-shaped position management, first buy a light position, and then gradually increase the position if the price of the currency falls again. The cost of each increase in position will be reduced, and once the price of the currency rebounds, you can make a profit.
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