Methods of Unwinding Positions, generally divided into two types.
1. Active Unwinding Strategies
1. Liquidation
If it is determined that the purchase was a serious mistake, especially if bought during the peak of a major bull run, one must have the resolve to cut losses decisively and liquidate positions in order to protect capital. There are many opportunities in the cryptocurrency market; as long as capital does not suffer significant losses, it can always be earned back.
2. Currency Exchange
When the current cryptocurrency is trapped and in a weak position, with further downside potential, if one accurately assesses that another cryptocurrency has greater potential for future gains and a stronger trend, one can decisively exchange to the new cryptocurrency to offset losses from the old one.
3. Short Selling
When it is determined that the position is deeply trapped and cannot be liquidated, and the market or a specific cryptocurrency has further downside potential, one can use short selling: first sell the trapped cryptocurrency, then buy it back at a lower price, effectively reducing the cost.
2. Passive Unwinding Strategies
1. Averaging Down
When the purchase price is not high or there is a strong outlook for the future market, the averaging down technique can be chosen. However, ordinary investors usually can only withstand one or two rounds of averaging down, so the timing of averaging is crucial.
2. Lying Flat
When fully invested and deeply trapped, unable to liquidate or add to positions, the only option is to passively wait. As long as it is one’s own money and not borrowed, there is patience to wait. One must not act emotionally and recklessly throw in the towel, blindly add to positions, or easily cut losses in a chaotic manner. Being trapped is not frightening; sometimes not being trapped means not making money, and being trapped could even lead to significant profits. Therefore, do not simply view being trapped as a disaster; if handled properly, it can completely turn into an opportunity.