The Fastest Shortcut for Ordinary People to Turn Their Fortune Around 'Rolling Positions' Ultimate Edition
After seven days of hard work, I have summarized the trading insights of the A9 masters from the last cycle: Master Tony, Banmu Xia, Fatty, Liangxi, and others!
In this thread (especially long), I will break down rolling positions thoroughly; it turns out this path is also accessible to ordinary people!
Systematic teaching from 0 to 1 to learn 'Rolling Positions' Complete Version
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In the cryptocurrency world, rolling positions usually amplify returns through adding positions in the spot or futures market.
The cryptocurrency trading industry has created many legendary stories.
For example, the demigod of the cryptocurrency world, 'Banmu Xia': Low-risk trading strategy quickly earned 4 million from an initial capital of 10,000. 'Fatty Bitcoin': In three years, grew from over 1 million to 200 million with a trading strategy from 1 million to 200 million. Their success involves a trading strategy—rolling positions.
Steps for Rolling Positions
1. Choose a Target: Select a cryptocurrency you believe will rise in the future.
2. Initial Purchase: Use all your funds to buy that cryptocurrency.
3. Set Stop-Loss: Set a stop-loss below the purchase price to limit your losses.
4. Monitor the Market: Continuously monitor market trends.
5. When the Price Rises: If the price increases to the preset target, use part of the profits to increase the position and buy more.
6. Repeat Steps 4 and 5: Continue monitoring the market and increase positions when the price rises.
Many people believe that rolling positions carry significant risks, but compared to opening futures contracts, the risks are actually more controllable.
Next, I will teach from a practical perspective.
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Understanding Rolling Positions Through Cases
Bitcoin Bull Market Review from 2020 to 2021. From October 2020 to March 2021, Bitcoin rose from $10,000 to $60,000. We will use this period as an example to review how rolling positions can help rapidly grow capital.
This is a one-sided upward trend during a bull market; we will review the rolling position operations during this period, focusing on how to effectively conduct rolling positions for rapid compounding growth of capital.
First Entry (Figure 1)
Arriving at the candlestick at the position indicated by the arrow below, we can see that after a period of medium- to long-term oscillation, Bitcoin formed a converging triangle structure. At this position, a large bullish candle broke above the descending trend line, signaling a bullish signal.
Converging triangle right side large bullish candle breakout, signaling a bullish signal.
Therefore, at the position indicated by arrow 1, when BTC sends a right-side bullish signal, we can chase the right-side breakout and, hypothetically, open a BTC long position.
Second Entry (Figure 2)
The subsequent market entered a very strong upward trend. At the position indicated by the mouse, we can see that Bitcoin formed an ascending triangle converging pattern.
(Figure 3) At this position, it is precisely the appropriate timing defined by the overweight individual, which is the timing for rolling positions, located where arrow 2 points. If we perform right-side breakthrough chasing at this position and open a BTC long position, we can see that Bitcoin broke through the previous high after several medium- to long-term oscillations with a large bullish candle. This position conforms to the overweight individual's three-pronged approach: right-side trading, chasing breakthroughs, and increasing positions with floating profits.
Additionally, at the converging triangle formed at the position indicated by arrow 2, a position for increasing the size also appears, which is where arrow 3 points.
We can regard it as a support point of the upward trend line. At this position, according to the strategy defined by the overweight individual, increasing the position during a pullback is feasible. When the price falls near the upward trend line and shows a small real body candle followed by a large bullish candle, this is also an opportunity to increase the position and is part of the rolling position process.
(Figure 4) It should be noted that the position of arrow 3 belongs to relatively left-side trading. Left-side trading carries more risk, but the entry's risk-reward ratio is better. Relative to the first position, the second position is a floating profit increase (also known as rolling positions). It can be seen that the market then experienced a strong upward trend. By January 2021, Bitcoin's price reached about 40,000 dollars, then experienced a significant pullback and subsequently formed a converging triangle structure.
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(Figure 1) Reviewing our first two entries, assuming at this moment our candlestick has evolved to a position before a significant retracement occurs, with a price of about 40518. At this time, we can see that the floating profit increase at position 2 (rolling position) has risen by 101%.
(Figure 2) And initially holding the long position at point 1 until this position would have resulted in a 261% increase.
After completing the rolling position operations, the long trade at point 2 has already captured the subsequent main wave. When the price reaches a stage where resistance is encountered, this portion of the position can be quickly reduced. That is to say, one can close the BTC long position at the pullback level of 40518 directly.
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Third Opportunity for Increased Position
Looking back from the price of 40518, we can see that there are also opportunities for rolling positions later on. As shown in the figure, point 4 is a position suitable for right-side breakthrough chasing, appropriate for rolling positions. Similarly, point 5 is a left-side pullback position for increasing the position (similar to the earlier point 3, left-side increases have a better risk-reward ratio).
Performing left-side trading strategy rolling positions at positions 3 and 5 tests the trader's technical level even more.
When buying at a low point or near the moving average, more indicators or strategy signals must be combined to serve as the basis for trading.
For example: We can open a mid-term moving average at the daily level, such as MA30. At the position of arrow 3, we can see it is at the support level of the first converging triangle, and a bullish candle has formed, standing above the daily MA30. Therefore, this position can serve as a basis for judgment.
Similarly, at the position of arrow 5, if we open the Fibonacci retracement of the previous upward trend, we can see that the low point of the candle at position 5 has essentially retraced to the 0.5 level of the previous upward trend. This indicates that once the upward trend is established, secondary pullbacks to 0.5 or even the extreme level of 0.618 are very significant positions. After a bullish candle forms here, the position of arrow 5 can also serve as a suitable position for rolling positions.
Next, at position 6, we can see a large bullish candle breaking through the previous high, which is a position suitable for rolling positions.
Subsequently, the market reached position 7.
On this day, a large bullish candle first broke the previous high. Therefore, at position 7, we can use it as a basis for rolling position operations.
After the large bullish candle is formed, chasing the breakout is a reasonable choice. However, we later see that the breakout at position 7 was actually a false breakout. If we had rolled positions at position 7, subsequent signals indicated that this operation failed. Even if a high point were formed again after position 7 and a breakout occurred, it subsequently fell, which is also a false breakout.
Therefore, if we had rolled positions at position 7 and the signals that followed, this rolling position operation would have failed.
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Suppose you only have 50,000; how can you use this money to start your investment journey?
First, this 50,000 should be your profit. If you are still in a loss, then don't rush to look further.
Assuming you buy Bitcoin at a price of 10,000 and set a 10x leverage, using only 10% of the position, which means only using 5,000 as margin. This is equivalent to using 1x leverage, setting a 2% stop-loss; even if the stop-loss is triggered, you will only lose 2%, which is 1,000. How do those who face liquidation end up liquidated? Even if you get liquidated, you only lose 5,000, right? How is it possible to lose everything?
If you guessed right and Bitcoin rises to 11,000, you continue to open 10% of the position, also setting a 2% stop-loss; even if the stop-loss is triggered, you still earn 8%.
What about the risks? Isn't the risk very high?
Following this logic...
Suppose Bitcoin rises to 15,000; you continuously increase your position, capturing this 50% movement, you should be able to earn around 200,000. By capturing two such movements, your account can grow to around 1,000,000.
There’s no need for compound interest; 100x growth comes from two 10x movements, three 5x movements, or four 3x movements, not from daily or monthly 10% or 20% compound interest. That’s just nonsense.
Rolling positions are not suitable for all cryptocurrencies. Choosing cryptocurrencies with good liquidity and active trading can reduce risks. Do not over-increase positions; otherwise, it may lead to liquidation. Setting stop-losses and take-profits can help you control risks and lock in profits.
Stay calm during market fluctuations; do not make impulsive decisions. If the market fluctuates violently, rolling positions are not suitable, as it is easy to make wrong decisions influenced by emotions.
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How to Avoid Risks in Rolling Positions
The previous increases in positions were smooth, but in reality, it may not be so smooth. Let's review the first two trades.
1. Initial Entry: At position 1, we chased from the right side, opening a BTC long position.
2. Increase Position: At position 2, we also increased our position by rolling when breaking through on the right side, opening another BTC long position.
After completing the trades at positions 1 and 2, our average cost has moved up, approximately located between position 1 and position 2. We can see that after breaking through position 2, the market indeed formed an upward trend. However, after increasing the position at 2, it is also possible that the market did not continue to rise but formed a reversal pattern, which is completely reasonable; we cannot accurately predict market trends.
When this situation occurs, we will encounter profit retracement. Originally, the trade at position 1 was profitable, but after increasing the position at 2, the risk increased, leading to a price drop during which profits retraced. Once the price falls below the average cost of our two trades, the profit retracement will turn into a loss.
Moving Stop-Loss
Through rolling position operations, while freeing profits, our risks also increase. To control risk after rolling position operations, moving stop-losses must be implemented. Beginners can refer to volatility indicators such as ATR (Average True Range), while experienced traders can use technical indicators, price actions, etc., to find favorable stop-loss points.
For example, after rolling positions at position 2, we can set the stop-loss for the newly added position below the ATR volatility indicator-related trailing stop-loss curve.
The specific operation is: open a BTC long position at position 2. If this is a false breakout, meaning it breaks out and then falls back, we can reduce this newly added position based on the price given by the trailing stop-loss curve. Thus, even if the rolling position fails, we can first reduce this newly added portion to minimize losses.
6/ How to Avoid Risks in Rolling Positions The previous increases in positions were smooth, but in reality, it may not be so smooth. Let's review the first two trades.
1. Initial Entry: At position 1, we chased from the right side, opening a BTC long position. 2. Increase Position: At position 2, we also increased our position by rolling when breaking through on the right side, opening another BTC long position. After completing the trades at positions 1 and 2, our average cost has moved up, approximately located between position 1 and position 2.
Between 2, it can be seen that after breaking through position 2, the market indeed formed an upward trend. However, after increasing the position at 2, it is also possible that the market did not continue to rise but formed a reversal pattern, which is completely reasonable; we cannot accurately predict market trends.
When this situation occurs, we will encounter profit retracement. Originally, the trade at position 1 was profitable, but after increasing the position at 2, the risk increased, leading to a price drop during which profits retraced. Once the price falls below the average cost of our two trades, the profit retracement will turn into a loss.
Moving Stop-Loss
Through rolling position operations, while freeing profits, our risks also increase. To control risk after rolling position operations, moving stop-losses must be implemented. Beginners can refer to volatility indicators such as ATR (Average True Range), while experienced traders can use technical indicators, price actions, etc., to find favorable stop-loss points.
For example, after rolling positions at position 2, we can set the stop-loss for the newly added position below the ATR volatility indicator-related trailing stop-loss curve.
The specific operation is: open a BTC long position at position 2. If this is a false breakout, meaning it breaks out and then falls back, we can reduce this newly added position based on the price given by the trailing stop-loss curve. Thus, even if the rolling position fails, we can first reduce this newly added portion to minimize losses.
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Disadvantages of Rolling Positions
Through the simple example above, I believe everyone should understand the definition of rolling positions, which is to increase positions based on profits, and suitable positions for rolling positions, such as at the breakout point of a secondary pullback or the low point of a secondary pullback.
Some people may think rolling positions are so simple, that making money is too easy.
In fact, it’s not like that. We are just using simple examples to clarify this concept. In reality, rolling positions require a very high overall quality from traders. Rolling positions are only suitable for one-sided trending markets, meaning after increasing the position, the price continues to rise, and after a pullback, it continues to rise.
In fact, 90% of market conditions are oscillating conditions. In such cases, if you continuously increase your position, you will only incur continuous losses. For example, if you roll positions during an oscillating market, the result will be continuous losses. If you've rolled positions during the oscillating market of the past four months, you will also incur continuous losses. Unless you have a large amount of capital, you will lose all your funds.
Therefore, rolling positions are only suitable for about 10% of one-sided trending markets. At the same time, rolling positions must be combined with very strict and scientific moving stop-loss strategies; otherwise, the overall risk will be very high.
After the stop loss on this trade on 2021-01-20, the overweight individual chose to stop trading. Looking back, his withdrawal was very wise and insightful. This is the operation style of the overweight individual: there are no particularly stunning trades, but such a system can bring long-term substantial returns.
Summary of the Overweight Individual’s Rolling Position Trading Records
However, from the overall trading records of the overweight individual, his overall win rate is quite low, for the following three reasons:
1. Breakout Trading: The overweight individual focuses on breakout trading, while most breakouts tend to fail. Nevertheless, he continues to engage in breakout trading because the losses from failed breakouts are minor, possibly only losing 1% to 2% of capital. However, if the breakout succeeds, his account could double or more, leading to a very high risk-reward ratio that can reach dozens of times. Even if breakouts are likely to fail, this risk-reward ratio makes him willing to try.
2. Focus on Major Trends: The overweight individual only captures major trends; many times, even if he earns a good profit, he does not exit. His goal is to capture major trends, which leads to a lower win rate. If he focused on capturing small trends, the win rate would be much higher, but he wouldn't achieve the same results. He calmly accepts a low win rate because his goal is the enormous returns brought by major trends.
3. Not Accepting Missing Out: The overweight individual is unwilling to miss any major trend. Without accepting missing out, he continuously tries, entering whenever there is a breakout signal. Only by doing so can he ensure that once a trend starts running, he is definitely present to capture the profits from major trends.
The overweight individual's operation method emphasizes risk control, adheres to breakout trading, focuses on major trends, and ensures capturing every potential major trend through continuous attempts. Although the win rate is low, his high risk-reward ratio and clear strategy enable him to achieve very exaggerated returns in the long run.
7/ Disadvantages of Rolling Positions Through the simple examples above, I believe everyone should understand the definition of rolling positions, which is to increase positions based on profits, and the suitable positions for rolling positions, such as at the breakout point of a secondary pullback or the low point of a secondary pullback.
Some people may think rolling positions are so simple, that making money is too easy.
In fact, it’s not like that. We are just using simple examples to clarify this concept. In reality, rolling positions require a very high overall quality from traders. Rolling positions are only suitable for one-sided trending markets, meaning after increasing the position, the price continues to rise, and after a pullback, it continues to rise.
In fact, 90% of market conditions are oscillating conditions. In such cases, if you continuously increase your position, you will only incur continuous losses. For example, if you roll positions during an oscillating market, the result will be continuous losses. If you've rolled positions during the oscillating market of the past four months, you will also incur continuous losses. Unless you have a large amount of capital, you will lose all your funds.
Therefore, rolling positions are only suitable for about 10% of one-sided trending markets. At the same time, rolling positions must be combined with very strict and scientific moving stop-loss strategies; otherwise, the overall risk will be very high.
After the stop loss on this trade on 2021-01-20, the overweight individual chose to stop trading. Looking back, his withdrawal was very wise and insightful. This is the operation style of the overweight individual: there are no particularly stunning trades, but such a system can bring long-term substantial returns.
Summary of the Overweight Individual’s Rolling Position Trading Records
However, from the overall trading records of the overweight individual, his overall win rate is quite low for the following three reasons:
1. Breakout Trading: The overweight individual focuses on breakout trading, while most breakouts tend to fail. Nevertheless, he continues to engage in breakout trading because the losses from failed breakouts are minor, possibly only losing 1% to 2% of capital. However, if the breakout succeeds, his account could double or more, leading to a very high risk-reward ratio that can reach dozens of times. Even if breakouts are likely to fail, this risk-reward ratio makes him willing to try.
2. Focus on Major Trends: The overweight individual only captures major trends; many times, even if he earns a good profit, he does not exit. His goal is to capture major trends, which leads to a lower win rate. If he focused on capturing small trends, the win rate would be much higher, but he wouldn't achieve the same results. He calmly accepts a low win rate because his goal is the enormous returns brought by major trends.
3. Not Accepting Missing Out: The overweight individual is unwilling to miss any major trend. Without accepting missing out, he continuously tries, entering whenever there is a breakout signal. Only by doing so can he ensure that once a trend starts running, he is definitely present to capture the profits from major trends. The overweight individual's operation method emphasizes risk control, adheres to breakout trading, focuses on major trends, and ensures capturing every potential major trend through continuous attempts. Although the win rate is low, his high risk-reward ratio and clear strategy enable him to achieve very exaggerated returns in the long run.
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Rolling Positions and Pyramid Position Increase
If you are interested in rolling positions, you must also understand pyramid position increases.
Pyramid position increases and rolling positions are both common strategies in trading; you can understand it as 'pyramid position increase is a more conservative form of rolling positions.' They have many similarities,
including:
> Trend Following: Both are executed when the market trend is evident, utilizing profit opportunities brought by trends.
> Gradual Position Increase: Neither is to fully load the position at once, but rather to gradually increase the position based on market trends.
> Floating Profit Basis: The basis for increasing positions is on existing floating profits, not on averaging down during losses.
The pyramid position increase method is a technique that can exponentially increase profits; its essence is to increase positions in the direction of the trend based on existing profits, using current profits to seek future returns.
Both pyramid positioning and rolling positions are only suitable for strong one-sided markets, which can either be a rapidly ascending trend or a rapidly descending trend. As shown in the figure below, the steps of pyramid position increase can be clearly seen (Figure 1).
The pyramid position increase method is a gradual approach to increasing positions in the direction of the trend, but it is definitely not the 'averaging down method' used by many stockholders; the most direct distinction is:
> We do not increase positions when in loss—averaging down against the trend is the cause of many people suffering severe losses, even leading to liquidation.
> The pyramid position increase method and rolling positions (increasing positions with floating profits) are quite similar; the main difference is that in pyramid position increases, the proportion of increased positions becomes smaller as time goes on.
As the trend runs longer, there is a higher likelihood of encountering adverse reversal trends, and psychological pressure gradually increases, making the pyramid position increase method more conservative. When comparing pyramid position increases to rolling positions:
> Gradually Reduce Position Increase: Total position growth is slower; even if the market reverses, total loss is controlled within a smaller range.
> Each Increase the Same Position: Total position grows rapidly; if the market has slight adverse fluctuations, it may lead to significant losses, which is a higher risk.
Practical Suggestions for Rolling Position Strategies
Rolling position techniques are not complicated, but their high risk and high return mean this is a strategy for professional veterans, especially suitable for one-sided trending markets. The core of rolling positions lies in position management and trend judgment, so it needs to be combined with scientific capital management and moving stop-loss strategies. The following framework will detail the practical steps of rolling position strategies, helping you capture trends in the market and steadily increase positions.
Basic Knowledge and Preparation
Basic Understanding of Leverage Trading
In rolling positions, the use of leverage can amplify returns but also comes with significant risks. Therefore, it is recommended that you use leverage in a gradual position mode, avoiding the risks of full position operations. Full position operations are extremely high risk and are particularly unsuitable in rolling position strategies. Set Trading Goals
The goal of rolling positions is to achieve compound growth through increasing positions, but this applies only to one-sided markets. In most markets (90% oscillating markets), rolling position strategies are not applicable. Thus, we need enough patience to wait for clear trend markets. Setting small capital doubling goals can help you stay focused, but more importantly, wait for the timing after confirming the trend.
Selection of Technical Indicators: To accurately judge trends, the following indicators can help you find the best timing for rolling positions.
> MA (Moving Average): The main tool for judging major trends and pullbacks.
> MACD: Confirming trend strength and potential reversal signals.
> Converging Triangle: A common oscillating pattern; when it breaks out, it might signal the start of a trend.
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Core Strategy of Rolling Positions
Applicable Conditions: One-sided Markets
The core applicable condition for rolling position strategies is one-sided markets, which means clear trend markets. In oscillating markets, rolling position strategies may lead to frequent stop losses or even losses. Therefore, you must wait for clear trend signals in the market, such as breakouts after prolonged consolidation, before rolling position operations.
Mindset and Timing
Rolling positions not only tests your technical analysis skills but also your mindset. When faced with opportunities that have great profit potential, you must have enough patience to wait for high-certainty moments. Rolling positions are not suitable for frequent operations. We only increase positions in confirmed trend opportunities, such as breaking through long-term resistance levels or one-sided trends after oscillation patterns.
Core Logic: Position Management and Trend Judgment
The core of rolling positions lies in position management and trend judgment. When judging trends, you need to distinguish between true and false breakouts, recognizing when a pullback occurs and when a trend reversal happens. This requires not only technical analysis skills but also strict capital management and moving stop-loss strategies. After each increase in position, move up the stop-loss to ensure that the floating profit is not swallowed by market fluctuations.
Timing and Proportion of Position Increase
The timing of increasing positions during rolling positions is crucial. Typically, it is done after breaking through a trendline in the direction of the trend or against the trend when the trend pulls back to near the moving average. The funds for each increase in position should follow a pyramid shape; as the number of increases increases, the proportion of the increase should gradually decrease to avoid excessive risks from subsequent increases.
Practical Steps
Step 1: Initial Entry
Establish a position at a breakout point after sufficient oscillation, such as breaking through a significant resistance level. The initial position should be controlled at 10%-20% of the total capital to avoid significant market fluctuations. At this time, the stop-loss should typically be set 2%-3% below the key support level.
Step 2: Increase Position in the Direction of the Trend
When the initial position shows a floating profit, one can choose to increase the position during the next pullback or breakout point. Typically, when the price pulls back to near the moving average and then rebounds, or breaks through the previous high, it can serve as a signal to increase the position. The funds for each increase in position should not be too large; it is generally recommended that the funds for each increase do not exceed 30% of the original position.
Step 3: Risk Control and Take Profit Strategy
Risk control is especially important in rolling position strategies. With each increase in position, you need to use moving stop-losses to gradually move the stop-loss up to the previous increase point, ensuring the floating profit is not swallowed by market fluctuations. When a reversal signal occurs, promptly reduce the position or close the position to avoid significant retracements.
Step 4: Accumulate Compound Interest
After each successful rolling position, you can continue to invest the floating profit to increase the position, forming compound growth. However, avoid frequent operations; rolling positions are suitable for medium to long-term trends and not for short-term frequent increases. The goal of rolling positions is to continually expand the position with the continuation of the trend, maximizing profits.
Trading Frequency
Rolling position operations are suitable to be conducted when breaking through important resistance and support levels at daily or weekly levels, rather than frequent short-term trading. Frequent increases in position during oscillating markets carry significant risks, which may lead to substantial losses. Floating profit increases carry risks.
Although rolling position strategies can amplify profits, increasing position with floating profits essentially increases leverage and risk. Therefore, it is recommended to adopt a pyramid model when increasing positions, with smaller increases as you go further. When profits are substantial, consider gradually reducing the position instead of continually increasing it.
Capital and Stop-Loss Management
In rolling position strategies, scientific capital management and moving stop-loss strategies are key. If the stop-loss position is not adjusted in time after increasing the position, it may result in originally floating profits turning into losses. Each time before increasing the position, make sure to set specific positions and moving stop-loss strategies in advance.
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Common Questions and Answers
Is rolling position suitable for beginners?
Rolling position strategies carry significant risks; it is recommended that beginners start with low leverage, stable trend trading, and accumulate experience before considering rolling positions.
How to determine the timing for increasing positions?
The timing for increasing positions usually occurs after breaking through key points in the trend or rebounding when pulling back to support levels. Technical indicators such as moving averages, MACD, converging triangles, etc., can help in judgment.
How to operate in an oscillating market?
Rolling positions are not suitable for oscillating markets; when encountering such markets, one should reduce the frequency of operations and patiently wait for a trend to emerge.
Can rolling positions be executed directly when opening a position?
Whether to roll positions directly when opening a position or wait until the position is profitable before using the profits to increase positions depends on your trading strategy and market conditions. The core idea of rolling positions is to continuously increase position size in trending markets, using floating profits to augment the position for compound growth. Therefore, in general, rolling positions are conducted based on existing profits, allowing the market's earned money to bear the risk of new positions, reducing personal capital exposure.
Here are two common rolling position operation methods:
Open a position and roll positions after trend confirmation: After confirming the trend, open a position, and then progressively increase the position through rolling positions as the trend develops. This method utilizes the power of the trend, rolling positions with floating profits to seek higher returns. A typical approach is to open a position after the market breaks through critical positions and then gradually increase the position once there are profits. The risk is low at this time since the subsequent increased positions are funded by profits.
Open a position and roll positions directly: In some strategies, traders immediately roll positions when opening a position, usually relying on significant capital leverage. This method carries higher risks because there are no profits as a buffer initially, and directly increasing positions may lead to greater losses. It is suitable for very experienced traders when the trend is exceptionally clear.
The rolling position discussed in this article is more inclined to utilize profits for increasing positions, as emphasized by the overweight individual and Master Li, by increasing positions with floating profits in a trend and controlling risks through stop-loss mechanisms. Therefore, it is generally recommended to wait until the position has a certain profit before using rolling position strategies to reduce risks and effectively amplify profits.
Final Suggestions
I want to provide some suggestions for beginners or friends who want to emulate this approach.
1. Lower Risk-Reward Ratio:
Beginners may find it hard to endure prolonged floating losses and continuous stop losses to capture major trends, very likely to exhaust their capital or collapse mentally before a major trend occurs. Therefore, I suggest beginners lower their risk-reward ratios, but not too low. Generally, the risk-reward ratio can be set around 2 to 3 times. The specific ratio should be adjusted according to market conditions. If market conditions are suitable for 2 or 3 times risk-reward ratios, use those; if the market is particularly favorable, boldly attempt 4 or even 5 times risk-reward ratios. Doing so can keep the win rate close to 50%, between 45% and 55%, making it easier to maintain a good mindset. It’s hard for an average person to persist with a 20% win rate like the overweight individual. If pursuing a 10 times or even 20 times risk-reward ratio, one must endure long periods of stop losses and floating losses.
2. Accept Missing Out:
Not wanting to miss any market movement and trying to seize every major trend will inevitably sacrifice the win rate. Beginners should calmly accept missing out, sacrificing part of the movement to capture more certain parts. For example, if there are 10 market movements within a year, capturing just 2 to 3 of them can yield good profits, and the profit curve will be smoother without too many stop losses.
Focus on Market Context Rather Than Technical Details: Instead of delving into numerous technical books and videos, learn to assess market context. Invest more energy in good markets and observe and rest in bad markets, only earning easy money. This is crucial. The overweight individual’s operations are very simple; most of his profits come from the last two trades. If he had not persisted and given up early, he would not have achieved such results. Therefore, trading in good markets is easier to profit, while continuously trading in bad markets won’t make money. For instance, in 2022, most people struggled to profit, so in bad markets, one should rest and in good markets, trade more to earn more money.
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