Investment is not simply about buying and selling; position management is crucial. It is a technique for planning entry in batches, stop-loss, and take-profit during investment decisions. The core logic is high valuation with low position and low valuation with high position to control risk. Today, I will share with you the classic three position management methods.
One: Funnel Position Management
Funnel position management is a strategic capital layout method in a downward market. It divides positions into three or five equal parts in detail. For example, for cryptocurrency A, when the price is 10 yuan and it drops by 10%, an additional 1000 yuan is added; if the drop reaches 20%, then an additional 2000 yuan is added. If the market continues to decline, an additional 3000 yuan will be added gradually, continuing this operation until the market reverses and rises. This method is suitable for a downward market because the initial capital is small, and it reserves ample chips for subsequent additions. However, it should be noted that since we do not know when the real bottom will come, each additional purchase should not be too close; otherwise, if the market bottom has not yet arrived, our ammunition may be exhausted.
Two: Rectangle Position Management Method
Rectangle position management is an effective strategy for dealing with volatile markets. It evenly divides the total position, commonly into three or five equal parts, with a fixed amount for each part. When the market direction is unclear and fluctuating up and down, positions can be added in fixed amounts in batches.
The advantage is that each time positions are increased by a fixed proportion, the holding cost gradually rises, spreading the risk evenly. Once the subsequent market trend aligns with the judgment, the profit space opens up. The drawback is that in the initial stage, the average cost is high, and if the market does not develop as expected, the price is difficult to break the breakeven point, and investors easily fall into a trapped situation. During the process of adding positions, everyone must be cautious and cannot blindly add positions based solely on intuition. A comprehensive consideration of factors such as the market trend of the target, changes in trading volume, and various technical indicators should be undertaken to accurately judge the timing for adding positions. One should not easily go fully invested, so as to steadily progress in a volatile market, effectively control risks, and seize profit opportunities.
Three: Pyramid Position Management Method
Pyramid position management is exactly the opposite of funnel position management. Its core idea is to boldly invest a larger amount of funds at the initial position, and then, as the market shows an upward trend, the proportion of additional investment gradually decreases. This mode resembles a pyramid shape, with a strong base and a gradually narrowing top; for this reason, it is called right-side trading.
When the market is in an upward trend, intervene in the trend to gain substantial profits; this strategy shows its advantages when the market is favorable. It manages positions based on return rates, where a higher win rate corresponds to a higher position, while the risk factor is relatively low. For example, in a long-term bull market, if everyone can grasp it accurately, rapid asset appreciation can be achieved.
The drawback is that due to the heavy initial position, there are high requirements for the timing and accuracy of the first entry. Once the entry point is mistaken, the subsequent risk exposure is large. Moreover, in a volatile market, the repeated fluctuations in prices make it difficult to leverage its advantages, making it challenging to obtain stable returns. Therefore, in actual investment operations, pyramid and other position management methods, such as rectangle position management, can be combined, especially in wave operations. The two can complement each other effectively to deal with the complex and variable market environment. After all, any single method has its limitations.
In every successful investment decision, position management plays a very important role. Only with scientific position management can one maintain a calm mindset to face market fluctuations.