Unwinding is an inevitable challenge that investors will encounter in market fluctuations. When the assets held are locked in, how to deal with and reduce losses is the key. The following are three common unwinding strategies, each with different applicable scenarios and risk management ideas:
1. Stay constant in the face of change, no selling, no loss
The core of this method is to hold on, that is, as long as you don't sell, you won't actually lose money. The premise of choosing this strategy is that you have long-term bullish confidence in the target and have sufficient funds and psychological preparation to cope with further market fluctuations or declines.
Advantages: No need to make a selling decision immediately, you can wait for the market to pick up, and reduce the psychological pressure caused by short-term fluctuations. Disadvantages: This method requires strong financial support to cope with deeper declines. At the same time, this may be a long waiting process with high opportunity costs, and funds cannot be transferred to other assets with opportunities in time.
2. Dial operation method
This method sells part or all of the position at a stop loss first, and then buys it back when it rebounds to reduce losses or partially unwind. When doing this, investors need to find the right time for the rebound and re-enter the market at a low level.
Advantages: Dial-up operation can flexibly respond to short-term market fluctuations, and there is an opportunity to reduce costs by re-entering the market, quickly recover the capital or get out of the position. Disadvantages: It requires investors to have strong technical analysis capabilities and be able to accurately judge the rebound point. If the judgment is wrong, the loss may be aggravated and the best opportunity may be missed.
3. Cut the Gordian knot
This strategy is suitable for short-term investors. When faced with a one-sided decline, they will decisively stop losses and sell all their assets to prevent further losses. This method aims to stop losses quickly and avoid further losses.
Advantages: It effectively avoids further losses in a one-sided market, and is more suitable for short-term investors to quickly withdraw when the market turns to maintain liquidity. Disadvantages: Once sold, if the market rebounds, you may miss the opportunity to get out of the position brought by the rebound. Therefore, this method is suitable for short-term speculators, but not for investors who are optimistic about the target in the long term.
Summarize
The choice of unwinding strategy depends on the investor's financial situation, market judgment, risk tolerance and investment goals. If the investor has the confidence to hold for a long time and has sufficient funds, he can consider the method of not selling and not losing money. If the short-term capital flow is needed or the market judgment is sure, the method of shifting gears and cutting the Gordian knot is more effective. It is important that no matter which strategy is chosen, it is necessary to combine the market trend with the actual situation of the investor, not to operate blindly, and to remain rational and calm.