'We should put 200% of the funds into this trade instead of 100%.'
Written by: Leo
Translated by: Luffy, Foresight News
The art of speculation can be distilled into two points: how much you can earn when you're right and how much you can lose when you're wrong. Everyone reflects on those trades they were sure would be a huge success, questioning why their position was so light; similarly, they look back at hesitant trades, wondering why they kept increasing their position on a losing trade.
Position management is one of the hardest skills to master, but improving this ability is the most effective leverage. All top traders are constantly exploring how to enhance it because once a judgment goes wrong, the consequences can be dire. Although I have many shortcomings in execution, position management is one of the best things I’ve done in my career; it compensates for many other mistakes I have made.
One of my favorite stories is about Stanley Druckenmiller and George Soros discussing 'decisively doubling down in asymmetric opportunities'; they are the most outstanding fund managers.
In 1992, Druckenmiller served as the chief portfolio manager at Soros's Quantum Fund. Druckenmiller noticed that the Bank of England was artificially supporting the pound and was convinced that this support could not last too long. He approached Soros and articulated his views.
'George, I’m going to sell £5.5 billion tonight and buy German marks, which means we are betting 100% of the fund’s capital on this trade.'
As I was speaking, he began to frown, as if to say, 'What’s wrong with this kid?' I sensed he was about to overturn my argument. He said, 'This is the most ridiculous money management method I have ever heard. What you're describing is an incredible one-way bet.'
We should put 200% of the funds into this trade instead of 100%. Do you know how often this happens? About once every 20 years. What’s wrong with you?
Druckenmiller ultimately executed this trade at double the position size, which later became one of the most famous trades in history, yielding $1 billion in a single day. Soros even earned the nickname 'the man who broke the Bank of England' because of it.
The most profitable trade I have made to date was a swing trade when Coinbase and Robinhood announced the launch of $PEPE in November 2024. While executing the trade, I was filled with this legendary story, thinking, 'What would Soros do?'
That day around 6 AM, I was sitting on the toilet as usual, browsing my phone, checking group chat messages, monitoring Twitter trends, and observing charts. At that time, I had already taken a small long position on $PEPE because the chart looked great, and my intuition led me to buy, but the position had incurred significant losses, making me a bit anxious.
I was intently focused on the 1-minute K-line chart on the trading app when I suddenly saw a huge green candlestick shoot up, and I instantly broke even. Clearly, I was a bit excited but also very confused, then I received a Twitter notification: 'PEPE is listed on Robinhood.' I was still skeptical about whether this was real news because it was so unexpected, so I verified it through group chats and Twitter. Once I confirmed the news, a switch in my mind flipped, realizing this would be 'that once-in-a-lifetime trade.'
At the time of the Robinhood news release, its price surged from $0.000012 to $0.000016 in an instant. The reason this news was so striking is that since $DOGE and $SHIB, Robinhood had not listed any other memecoin. Moreover, there was no convenient way for Americans to purchase PEPE; they either had to buy it on-chain or through obscure exchanges. Listing on Robinhood opened the floodgates for a large amount of retail funds for PEPE, and the market quickly understood this.
Background: At that time, the historical highest price (ATH) of $PEPE was $0.000017. One of my favorite trades is breaking historical highs, and I realized that those who sold at this price did not understand the significance of this news at all.
I bought five times the current position at market price, almost using double the leverage of my entire portfolio to go long (position size = 2 times portfolio value). I looked at the dollar value on the trading app and felt a wave of nausea; if I had eaten breakfast, I would definitely have thrown up. I never thought I would invest so much in altcoins, let alone meme coins, but I felt completely calm inside because I knew it was the right choice.
About an hour after the Robinhood news release, Coinbase also announced the launch of $PEPE, with the price breaking historical highs. Later that day, Upbit listed $PEPE, pushing the price to $0.0000255. I didn’t even dare to look at the trading app because the fluctuations in profit and loss would affect my mood. At its peak, I made about 100% profit in less than 12 hours. It was a crazy day. Although I didn’t close at the peak, I still locked in substantial gains, exceeding the total profits from the past few months, which also highlighted the value of adjusting positions during asymmetric opportunities.
These are stories of being over-leveraged yet successful, but it would be a crime not to discuss the other side. Behind every story of a large-scale concentrated bet achieving success, there are countless stories of people who went all in and ultimately went bankrupt. This is precisely why investing correctly is so difficult: finding a balance between believing in your theory and boldly betting on it, while also respecting the market is not easy.
Sometimes you are full of confidence and heavily invested, yet you incur losses for several days, leading you to decide to cut your losses and exit. Amazingly, it’s as if the market god is watching your position; after you close out, the market immediately reverses, and the price moves exactly as you had argued. And sometimes you choose to stick it out, only to wake up a week later and find your portfolio down by 50%. Undeniably, this is a skill that is hard to master.
I have personally had many experiences of heavy losses, but one thing has kept me going: very strict risk management. If the price action doesn’t align with my theory and losses persist for a while, I will cut my losses. No matter how confident I am, the market is always right.
Never cling to losing trades; better trades are just around the corner. There will always be plenty of opportunities and trading ideas worth betting heavily on, but if I lose a significant portion of my portfolio, I won’t have enough position to execute the best opportunities.
Avoiding significant losses at all costs is indeed the most important concept in any risk game. What 'significant loss' means to you is relative. During the early stages of building a smaller portfolio, I had to take on more risk. I easily risked 10-15% of my portfolio on high-conviction trades because that was the nature of the market I was in. Everything on-chain is extremely illiquid and volatile, so I had to accept larger drawdowns to validate my theories. As my portfolio size grew, the market liquidity I entered improved slightly, and I could not afford to take such large risks. It is crucial to clarify your risk tolerance so that you know exactly how much loss you can sustain each time you trade. I have seen many talented and amazing traders exit the game due to an irretrievable massive loss.
This is why one of my favorite trading strategies is breakouts. I love top breakouts because it’s a clearly defined risk trade—either it’s profitable, or it fails quickly. For example, my timing for the $PEPE trade was when the price was struggling at the peak but failed to break through or fell back below ATH after a breakout. In both cases, I had clear exit points, so building a large position at that level was very reasonable.
Looking back on my trading career so far, all significant growth in my portfolio has come from 'going all in' returns. Every year, only a few trades generate most of the profits. Beyond that, it’s really a survival game. You must stay sharp enough to identify trades that can bring huge returns, but also be disciplined enough to avoid losing all your chips on ideas you lack confidence in and to avoid doubling down on losing positions.
In the next phase of my life journey, a major area I focused on improving is position holding. I excel in heavily betting, but I am not good at holding positions with large unrealized profits. This is the risk management awareness in my mind at play, but if I could apply my theories more often instead of frequent trading, I would go much further.
