Yesterday, I wrote an article about whether to set stop-losses when trading contracts. I wonder if everyone has different opinions. Today, let's discuss whether we should add positions when trading contracts.
In fact, this also depends on different situations; one should not just follow the crowd. Just like some people believe contracts should not be touched, while others think contracts are a fantastic trading tool.
Whether to add positions when trading contracts, I think there are two situations. It depends on the trading style whether to add positions or not.
1. We should not add positions; this situation mainly applies to short-term trading. Since it is short-term trading, it means that the direction has already been determined before opening a position. Needing to add positions implies that one's judgment is incorrect, and one should stop losses in a timely manner instead of blindly adding positions, which can easily lead to serious losses or even liquidation.
2. We should add positions; why should we add positions? I believe that except for having a clear purpose, in all other cases, we should not blindly add positions.
2.1 For short-term trading, it is actually possible to add positions, but one should have their own plan. For example, if my plan before opening a position is to add once, twice, or N times, then that is acceptable. Leaving some room from the beginning is part of the plan, rather than being blind. Of course, having a plan does not negate the necessity of setting stop-losses; otherwise, in extreme market conditions, adding positions every minute is also possible.
2.2 For medium to long-term trading, I believe it is very necessary to add positions. No trader can buy at the lowest point 100% of the time, so trading in batches becomes very important. It can effectively average out costs and increase profits.
In fact, there is not much difference between contract trading and spot trading. The biggest difference might be that contracts can leverage the principal, allowing for quicker acquisition of desired profits. At the same time, there is the risk of losing the principal entirely with contracts, which is different from spot trading. No matter how much the price drops in spot trading, there are corresponding digital assets, which may only temporarily depreciate. Of course, there is also the risk of approaching zero indefinitely.
Therefore, good position management is extremely important, whether for contracts or spot trading, don't you think? Especially for contracts, if not managed well, it could instantaneously go to zero, zero, zero...
