When trapped in a position, blindly holding on or randomly averaging down will only make things worse. Professional traders' strategies for getting out of a trap will help you calmly respond to market fluctuations and even turn losses into profits.

Step 1: Identify the Nature of the Trap

True Trap (Trend Reversal): If the price breaks below key weekly support (such as the 200-day moving average or previous low platform), decisively cut losses to avoid deep losses.

False Trap (Short-term Pullback): If the daily trend is intact and it is only a short-term shakeout on the hourly chart (such as a quick rebound after a spike), you can hold temporarily and wait.

Technique: Multi-timeframe Verification — Use the 1-hour chart to determine trend direction, the 15-minute chart to find averaging down points, and the 5-minute chart to capture reversal signals (such as RSI bullish divergence).

Step 2: Scientifically Average Down to Lower Costs

Common Mistake of Retail Investors: Averaging down every time there is a 10% drop, ultimately leading to being heavily trapped.

Correct Approach:

Averaging Down Points: Choose technical support levels (such as Fibonacci 38.2%, previous lows, or areas of high trading volume).

Averaging Down Ratio: Do not average down more than 50% of the original position in one go to avoid overly increasing risk.

Dynamic Take Profit: After averaging down, raise the average price, and when it rebounds to near the cost price, reduce the position by half to lock in some profits.

Example: A certain coin dropped from $1 to $0.7, averaged down 50% at the $0.65 support, and when it rebounded to $0.8, reduced the position by half, not only breaking even but also making a 15% profit.

Step 3: Hedge Protection, Lock in Risk

When the trend is unclear and you are unwilling to cut losses, you can use a hedging strategy:

Equal Hedging: When long positions are trapped, open an equal amount of short positions to hedge, setting the take profit for the short at the cost price of the long to ensure breakeven regardless of price movement.

Options Hedging (Advanced): Buy put options to hedge spot risk, which is lower in cost and more efficient.

Emergency Handling

If your position exceeds 50%, immediately cut half of it, and gradually resolve the remaining position using the methods above. Remember: preserving capital is the priority; minimizing losses is winning.

Summary: Getting out of a trap is not about hoping for luck but about converting passivity into proactivity through rational analysis, position management, and hedging tools. The market always has opportunities, but the principal is the only chip for a comeback.

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