In the coin market, if you manage your positions well, you will outperform the vast majority of people. The topic shared is the management of trading positions; how positions are managed directly determines your risk level, average holding price, and final profit size. This can be said to be the most important point aside from direction and mindset. What is position management? Position management refers to a specific set of plans for opening positions, increasing positions, decreasing positions, and how to clear positions when you decide to trade coins. Good position management is one of our important means of avoiding risk, allowing for minimized losses and maximized gains! How should positions be managed? Is there a standard? Many traders fail because one of the key reasons is that they treat market analysis as the entirety of trading, as if analyzing the market alone can determine victory or defeat. In fact, market analysis is just a foundational task; what truly decides victory or defeat is the work done after market analysis, which is the issue you consider after entering the market. Position management includes capital management and risk control. The term 'position' should not be understood as its literal meaning; it more expresses when to increase positions, how much to increase, when to decrease positions, and how much to decrease. That is, it is a roadmap of 'entry, increasing positions, decreasing positions, and exiting.' So the complete trading process should be: 1. Market analysis; you can use any technical analysis. 2. Position management, after entering the market, you need to consider what might happen next: what to do with profits, whether to increase positions, or take all profits and exit, or continue holding. If profits expand again, what to do? If losses occur, is it a stop loss, or hold the position, or partially exit first? How much loss will trigger a complete exit? Position management will simultaneously consider risk and return factors. 3. Strictly execute trades; when your plan is clear, you must implement it without letting market fluctuations disrupt your thoughts. 4. Summarize trades; after completing a trade, review it along with previous trades over a period of time. The review samples should cover uptrends, downtrends, and fluctuations, then based on this, improve and optimize market analysis, position management, and the execution process of trades. We must first find an entry point based on our trading skills; this point is certainly a support line. When the market is above the support line, the trend is upward; when the market breaks below the support line, the trend is downward. More importantly, the support line is also the basis for defining potential risks; if the stop loss is placed below this support line, the potential risk range is determined. If the initial stop loss area below the support line is reached, one should exit or first close most of the position, and then gradually reduce positions as the market continues to drop until all positions are closed. Thus, the potential profit range is above the support line, and the upward trend of the market has not ended, so the potential profit is theoretically unlimited. After entering the market and rising, we can hold the original position for an increase or gradually increase positions based on the original position.
We will adjust the stop loss according to market developments. When the market behaves as expected, we should move the stop loss close to the cost price or below a certain support line, moving the stop loss continuously reduces the risk in the market, which is equivalent to securing floating profits.
When the price rises again to a new support or resistance level, then starts to retreat, the area below this support or resistance level becomes the area for reducing positions. At this time, we should gradually close all positions. To summarize: First, we need to find a support and resistance line for the cost price. When the price rises far from the cost line, we gradually increase positions, and the increase must be decreasing. When the price drops further from the cost line, we gradually reduce positions, which must also be decreasing. Your position management technique must consider both risk and return.
Six basic principles of position management:
First: Do not operate with a full position; always keep a certain proportion of spare funds.
Second: Buy and sell in batches to reduce risk, dilute costs, and amplify profits. The advantage of buying down in batches and selling up in batches is that your average price is lower than others, resulting in higher profits.
Third: When the market is weak, hold lightly; in a bear market, it's best not to exceed half a position.
Fourth: As market conditions change, adjustments to positions should be made accordingly, with appropriate increases or decreases.
Fifth: During a sluggish market, you can wait with no positions until opportunities arise.
Sixth: Change positions: retain strong coins and sell weak coins.
The above six principles apply to contracts. If you still don't understand, please read it carefully a few times, reviewing will help you learn!
Now let's talk about position management methods, which involve batch operations.
Batch operation refers to dividing the invested funds, performing actions in batches, whether building positions, adding to positions, or reducing positions. Batch operations can be completed within a day or over a period.
Why take these actions? Because the coin market is unpredictable; both rises and falls are highly probable events, and no one can accurately predict short-term price fluctuations, so it's essential to leave enough funds to deal with unpredictable volatility.
If you operate with a full position without sufficient confidence, once the market moves in the opposite direction, it can lead to huge losses. Therefore, you can reduce the risk of total investment by purchasing in batches, which can dilute costs and is the basis for reducing costs and increasing profits.
Next, let’s talk about batch buying: There are two types: equal division and non-equal division.
First: Equal division, also known as the rectangular buying and selling method, refers to dividing funds into several equal parts, buying or selling sequentially, with each purchase or sale having the same proportion of funds. Typically, 3 or 4 equal parts are used. For example, buy 30% first; if you start to make a profit, buy another 30%. If there is no profit, temporarily refrain from investing new funds. When the price of the coin reaches a certain high point or the market changes, sequentially reduce positions and sell.
Second: Non-equal distribution refers to using different ratios to buy or sell, such as 1:3:5, 1:2:3:4, 3:2:3, and other varying ratios. The patterns produced by these ratios include: diamond, rectangle, hourglass types, etc., with the pyramid type being the most commonly used for buying and selling.
Third: Use the same funds and positions to compare different methods.
Pyramid: Buy 5 layers at 1000, 3 layers at 1100, and 1 layer at 1200, average price 1055.
Inverted Pyramid: Buy 1 layer at 1000, 3 layers at 1100, and 5 layers at 1200, average price 1144.
Equal division rectangle: Buy 3 layers at 1000, 3 layers at 1100, and 3 layers at 1200, average price 1100.
Price rises to 1200 with respective profits: Pyramid 145, Inverted Pyramid 56, Rectangle 100
When the price drops to 1000, losses are: Pyramid +55, Inverted Pyramid -144, Rectangle -100.
By comparison, the pyramid type has the least cost and yields greater profits when prices rise. When prices fall, it bears more risk. The inverted pyramid is exactly the opposite; if the price drops to 1000, the inverted pyramid loses 144. In actual practice, it is more reasonable to use the upright pyramid method for buying and the inverted pyramid method for selling.
After a significant drop in coin prices, when we see a bottom but are uncertain whether it has truly bottomed, if we buy at this time, we fear further drops might trap us; if we don't buy, we worry about missing out on a potential upward reversal. In this case, we can adopt the pyramid position building method.
For example:
A certain coin drops to the 10U position, buy with 20% of the position; when the price drops to the 8U position, enter with 30%. At this time, the average cost is 8.6U.
If the market continues to drop to 5U, then enter with 40%, averaging 6.5U.
If the price rebounds to 6.5, it’s breakeven. If it rebounds to 10U, that means a profit of 3.5U. But if you buy heavily at 10U, when the price returns to ten, you’ve just broken even.
During the price increase process, the lower the price, the larger the position should be when buying, and the position should gradually decrease as the price rises. This method of buying belongs to right-side position building. This cost is relatively safe; even if the market drops, as long as it doesn’t fall below the holding cost, there’s no need to panic.
This method requires a heavier initial position, so it has higher requirements for first-time entrants, needing to grasp market volatility, making it suitable for technical players.
The inverted pyramid selling method is the opposite of the upright pyramid, with a wider top and a narrower bottom, resembling a funnel. When the coin price rises, gradually reduce the amount of coins held, meaning the quantity sold increases as the coin price rises. This is the method for reducing positions or clearing out.
The core of position management is the above points. Once you understand this, believe that in the future, whether it's spot trading or contract trading, you'll have your own ideas.
If you can see this, then I believe you are definitely a loyal fan of the coin circle!
Let's proceed with practical teaching! (The following text will be explained in simple terms, as I’m afraid you won't understand complex language!)
Spot position management
Example: If you have 100,000 U, you should divide it into ten parts! Prepare to buy ten coins! Allocate 10,000 U for each coin! Each entry should involve the same amount of money!
Example: For XX coin, build a position with 50% of the price, and supplement the position with another 50%, where 50% means allocating 10,000 U for each coin, with 5,000 U reserved for supplementary purchases.
A major taboo in spot trading is to heavily invest in coins you are optimistic about and lightly invest in those you are not.
This coin is good; I'll buy a bit more and get 30,000 U.
This coin is just average; I’ll buy in with 10,000 U.
When operating, you should buy the same amount of each coin, strictly following the examples above! If you do not adhere to this position, an issue will arise: if you heavily invest 30,000 U in a coin and it loses 10%, that's 3,000 U lost, while if you lightly invest 10,000 U in another coin and it gains 10%, that’s only 1,000 U, so you are still at a loss!
Contract position management
ETH position allocation, calculated by quantity!
The maximum position for a 1000u principal cannot exceed 5.
The maximum position for a 3000u principal cannot exceed 10.
The maximum position for a 5000u principal cannot exceed 20.
The maximum position for a 10000u principal cannot exceed 30.
The maximum position for a 30000u principal cannot exceed 50.
The maximum position for a 50000u principal cannot exceed 100.
BTC position allocation, calculated by quantity!
The maximum position for a 1000u principal cannot exceed 0.5.
The maximum position for a 3000u principal cannot exceed 1.
The maximum position for a 5000u principal cannot exceed 2.
The maximum position for a 10000u principal cannot exceed 3.
The maximum position for a 30000u principal cannot exceed 5.
The maximum position for a 50000u principal cannot exceed 10.
In contracts, every order has the same initial capital, and the number of contracts is the same for each order. This way, you can operate smoothly in the contract group with K God! Take profits when needed, accept losses when necessary, treat yourself as a trading machine!
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