In the investment market, being trapped is a common dilemma faced by many investors. Here are four practical methods to break free from being trapped, which can be flexibly applied according to different market conditions:
I. Stop-Loss Method to Break Free
Applicable Scenario: A clear downward or upward trend, with a significant trapped position.
Key Operation Points: Decisively set stop-loss orders at key support/resistance levels and exit in a timely manner. Although there may be short-term losses, it can prevent further deterioration of the market leading to larger losses. For example, when the gold price falls below the important support level of 1800 USD/ounce and fails to rebound, one should decisively stop-loss to avoid further losses from a larger decline.
II. Inverted Pyramid Averaging Down Method
Applicable Scenario: The trapped position is relatively light, and it is judged that the market is about to reverse.
Key Operation Points: First, add a certain percentage to the position at the current price level, and after the price rebounds by a certain amount, add a larger position than last time to form an inverted pyramid shape. For example, first add 10%, then after the price rises by 5%, add 20%. By gradually increasing the position size, when the market reverses, not only can you quickly break even, but you can also achieve profits.
III. High Selling and Low Buying Method
Applicable Scenario: In a volatile market, prices fluctuate within a certain range.
Key Operation Points: When the price rises to the upper bound of the range, appropriately reduce the position; when the price falls to the lower bound of the range, buy back the same amount of position. Through multiple rounds of buying low and selling high, gradually reduce the holding cost. For example, if the stock price fluctuates in the range of 10 - 12 yuan, sell part of the position at 12 yuan, and buy back at 10 yuan to continuously lower the cost.
IV. Position Switching Method to Break Free
Applicable Scenario: The trapped asset performs significantly worse than similar assets or the entire market.
Key Operation Points: Sell the underperforming assets and switch to stronger, more potential assets. For example, if holding a poorly performing cryptocurrency while Bitcoin and other mainstream coins are performing well, you can switch to Bitcoin and use the rise of the strong asset to offset previous losses.
Precautions:
1. Before breaking free from being trapped, be sure to conduct a comprehensive analysis of the market trend to avoid blind operations.
2. Strictly control position sizes to avoid excessive positions due to averaging down, which increases risk.
3. During the trading process, maintain a good mindset to avoid making incorrect decisions due to emotional fluctuations.
There is no one-size-fits-all method for breaking free from being trapped. Investors need to choose the most suitable strategy for their own financial situation, holding situation, and market conditions to mitigate risks in the investment market.
