As ordinary people investing, we all hope for steady long-term profits, but the reality is that we either chase gains and get beaten up or are fully invested and stuck, staring blankly as we miss great market opportunities. Where does the problem lie? Much of it comes from not understanding the underlying logic of "position management"! Today, let’s clarify position management in a casual way so you can have a solid understanding and strategies for your future investments.

1. First, understand: What is position management?

In simple terms, position management refers to how to allocate your money in investments. For example, if you have 100,000 yuan, how much to invest in stocks or funds, when to buy, and when to sell – that’s position management. Don’t think this is only for professionals; we ordinary people need to pay more attention because we have less capital and weaker risk tolerance. Proper position management is essential to survive and make money.

2. Why is position management important?

(1) Protect yourself! Don't let the market wipe you out.

For example, in the first half of 2022, many stocks and funds crashed. If you went all in, your account would be halved, making it difficult to recover. But if you only bought a 30% position, you wouldn’t panic when it drops since you still have money to buy more at lower prices, gradually reducing your cost. The most important thing about position management is "to protect yourself," ensuring that during significant market drops, you won't lose everything and still have a chance to bounce back.

(2) Make money! Seize the opportunity to profit.

Conversely, if the market is good and your position is too light, while others are profiting greatly, you will only get a taste of the soup, if that. For example, after the pandemic in 2020, many stocks surged several times; if you were out of the market or had a light position, you could only regret it. Proper position management allows you to have enough "ammunition" when the market conditions are favorable to enjoy the benefits.

(3) Maintain a stable mindset! Don't be swayed by emotions.

The worst thing in investing is losing your composure and chasing gains. If your position is reasonable, you’ll know you still have backup if the market drops, preventing panic selling. And when it rises, you won't be tempted to go all in. With a stable mindset, your actions can be rational, increasing the chances of making money in the long run.

3. The Underlying Logic of Position Management: "Balance of Attack and Defense"

(1) "Defense": Control risk, survive.

1. Don't go all in.

Going all in is like putting all your eggs in one basket; if the market drops, you're done for. We ordinary people shouldn't gamble our life savings; always leave yourself a way out. For example, when the market is unclear, buy a maximum of 50% position and keep the rest of your money on standby. If it drops, you can add more; if it rises, you won't regret it.

2. Diversifying investments is not random diversification.

Some people think that diversifying investments means buying a bunch of stocks and funds, but that's incorrect. It needs to be "categorically diversified"; for example, buy a portion of stable bond funds for defense (safety) and a portion of stock funds or high-quality stocks for offense. This way, if one area underperforms, the other can shine, spreading the risk.

(2) "Attack": Seize the opportunity to make big money.

1. When the market comes, be brave to increase your position.

How to judge when the market is coming? No need for complex indicators; just observe market sentiment. When people around you are afraid to mention stocks, that's usually the bottom; when everyone rushes to buy, it might be the peak. For instance, at the end of 2018, the market was particularly bleak; at that time, be bold and increase your position in quality funds and stocks, and you will reap rewards in 2019 and 2020.

2. Buy and sell in batches; don't go all in.

If you want to buy a particular stock or fund, don't buy it all at once. For instance, buy in three batches: add more when it drops by 5%, then add again at another 5% drop. This strategy can lower your cost. The same goes for selling; sell a portion when it rises by 10%, then another portion at 20%, locking in profits.

4. Practical Position Management in Different Market Conditions

(1) Bear Market (Market drops significantly, widespread pessimism)

During this time, focus on "defense"; control your position to below 30%. Keep most of your money in bonds and money market funds to ensure your principal's safety. At the same time, choose some quality stocks and funds that have been undervalued, and buy small amounts after significant drops to gradually accumulate positions. When the bear market turns into a bull market, you can make a fortune.

(2) Volatile Market (Market fluctuates without a trend)

This is the time when position management is most tested, suitable for "buy low, sell high." Keep your position around 50%; if it rises significantly (e.g., index rises over 5%), sell a little; if it drops significantly (e.g., index drops over 5%), buy a little. Don’t try to perfectly time the bottom or the top; just make money from the fluctuations and accumulate wealth.

(3) Bull Market (Market rises significantly, everyone makes money)

In the early stages of a bull market, boldly increase your position to 70-80% to capture the main upward wave; during the mid-stage of a bull market, don't go all in; leave 10-20% for flexible operations; in the late stage of a bull market, gradually reduce your position to lock in profits. Remember, a bull market doesn't rise indefinitely; don't be greedy; withdraw once you've earned what you should.

5. Common Misunderstandings: Don't Fall into These Pitfalls of Position Management

(1) "Going all in based on news"

If someone says a particular stock will rise and you invest all your money in it, that's a recipe for disaster. The news might be false, and even if it's true, it might be released by the big players to let you take the bait.

(2) "Stubbornly holding to the end without adjusting positions"

After buying stocks or funds, if you ignore them and stubbornly hold on when they drop, you'll only end up deeper in trouble. Position management is not static; it needs to be adjusted based on market changes. Cut losses when necessary and add positions when appropriate.

(3) "Over-diversification, unable to manage"

After buying dozens of stocks and funds, you can't even remember what you bought, and managing them becomes overwhelming; in the end, the money you earn is not enough to cover the fees. Diversifying investments should be appropriate; just select a few different sectors and risk levels.

6. Summary: The core of position management is "dynamic balance."

The investment market is always changing, and position management is not a one-time solution; it needs to be dynamically adjusted based on market conditions and your own risk tolerance. Remember these points:

1. Never go all in; always leave a way out.

2. Balance of Attack and Defense: Well-matched defense (stable assets) and offense (high-risk assets).

3. Buy and sell in batches to reduce risk.

4. Stay calm; don’t let emotions dictate your actions.

For us ordinary people investing, don’t pursue overnight wealth; instead, steadily earn through position management. Over the long term, the returns won't be bad. In the future, when investing, think more about how to allocate your positions; earn more when the market is good and lose less when it’s bad. This way, you can survive longer and earn more in the investment market!

I hope this article helps you truly understand the underlying logic of position management, so you won't invest blindly in the future. If you find it useful, remember to share it with your friends who trade cryptocurrencies or buy funds, so everyone can learn how to manage their positions well and earn money in the long run!

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The above content represents personal opinions only and does not constitute any investment advice!