Written by: Leo
Translated by: Luffy, Foresight News
The art of speculation can be summarized in 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 positions were so light; similarly, they look back on those hesitant trades, wondering why they kept adding to losing positions.
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, as the consequences of a misjudgment can be unimaginable. Although I have many shortcomings in execution, position management is one of the best things I have done in my career, compensating for many other mistakes I've made.
One of my favorite stories is about Stanley Druckenmiller and George Soros discussing the story of "decisively doubling down on asymmetrical 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 firmly believed that this support could not last long.
"George, I'm going to sell £5.5 billion tonight and buy German marks, which means we're betting 100% of the fund's assets on this trade."
While I was speaking, he began to frown, as if something was wrong with the kid. I felt he was about to overturn my argument. He said, "This is the most absurd money management method I've ever heard of. What you're describing is an incredibly one-sided bet."
We should put 200% of our 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 with a double position, which later became one of the most famous trades in history, making a profit of $1 billion in a single day. Soros even earned the nickname "the man who broke the Bank of England" because of this.
The most profitable trade I've ever made was during the swing trading when Coinbase and Robinhood announced the listing of $PEPE in November 2024. While executing the trade, my mind was filled with this legendary story, thinking, "What would Soros do?"
Around 6 AM that day, I was sitting on the toilet scrolling through my phone, checking group chat messages, monitoring Twitter updates, and observing charts as usual. At that time, I had already taken a small long position in $PEPE because the charts looked great, and my intuition told me to buy, but the position had already incurred substantial losses, making me a bit anxious.
I was intently staring at the 1-minute candlestick chart on the trading app when I suddenly saw a massive green candle spike up, and I instantly broke even. Obviously, I was a bit excited but also very confused, then I received a Twitter notification: "PEPE is listed on Robinhood." I was still skeptical if this was true news because it was so unexpected, so I checked multiple sources in the group chat and on Twitter. When it was confirmed, a switch in my mind was flipped, realizing this would be "that once-in-a-lifetime trade."
At the moment the Robinhood news was released, its price spiked from $0.000012 to $0.000016 in an instant. The news was so striking because no other memecoins had been listed on Robinhood since $DOGE and $SHIB. Moreover, previously, there were no convenient purchasing channels for PEPE in the US; Americans either bought it on-chain or through obscure exchanges. Listing on Robinhood opened the floodgates for a lot of retail funds for PEPE, and the market quickly understood that.
Additional context: At that time, the historical peak price (ATH) of $PEPE was $0.000017. One of my favorite trades is breaking through historical highs, and I realized that those selling at this price did not understand the importance of this news.
I bought five times the current position at market price, using nearly 2 times leverage on the 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 in my stomach; if I had eaten breakfast, I would have definitely thrown up. I never intended to invest so much in altcoins, let alone meme coins, but I felt very calm inside because I knew it was the right choice.
About an hour after the Robinhood news was released, Coinbase also announced the listing of $PEPE, and the price broke through the historical high. 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 profits and losses were too great and affected my mood. At its peak, I made approximately 100% profit in less than 12 hours. It was a crazy day. Although I did not close my position at the highest point, I still locked in considerable gains, exceeding the total profits of the past few months, highlighting the value of adjusting positions in asymmetrical opportunities.
These are stories of being over-leveraged yet successful, but it would be a crime not to talk about the other side. Behind every story of a large concentrated bet succeeding, there are countless stories of people who went all in and ended up bankrupt. This is precisely why investing correctly is so difficult: finding a balance between believing in your theory and boldly betting on it, while respecting the market is not easy.
Sometimes you are confident and make a big bet, but after several days of losses, you decide to cut your losses and exit. Miraculously, as if the market gods were watching your position, the market immediately reverses after you close your position, and the price moves exactly as you argued. And sometimes you choose to hold on, only to wake up a week later to find your portfolio down 50%. Undeniably, this is a skill that is difficult 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 does not align with my theories and the losses persist for a while, I will cut my losses. No matter how confident I am, the market is always right.
Never get attached to losing trades; better trades are just around the corner. There will always be plenty of opportunities and trading ideas worth loading up on, but if I have lost a significant part of the portfolio, there won't be 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 my early days building smaller portfolios, I had to take on more risk. It was easy for me to bet 10-15% of my portfolio on high-conviction trades because that was the nature of the market I was in. Everything on the chain was extremely illiquid and volatile, so I had to accept larger drawdowns to validate my theories. As my portfolio size grew, the liquidity of the markets I entered improved slightly, and I couldn't afford to take on that much risk anymore. It is crucial to clarify your risk tolerance so that you know exactly how much you can afford to lose every time you trade. I have seen many talented and amazing traders exit the game due to an irretrievable large loss.
That's why one of my favorite trading strategies is breakouts. I love top breakouts because it is a clearly defined risk trade; either you make a profit, or it quickly fails. For example, my timing for trading $PEPE is when the price struggles at its peak and fails to break out, or when it breaks out and then falls back below its ATH. In both cases, I have clear exit points, so it makes perfect sense to build a large position at that point.
Looking back on my trading career so far, all significant growth in the portfolio has come from "going all in" returns. Every year, only a few trades create most of the profits. Other than that, it really is a survival game. You must remain sharp enough to identify those trades that can yield huge returns, but also disciplined enough to avoid losing all chips on ideas lacking confidence and to avoid doubling down on losing positions.
In the next phase of my life's journey, a major area I focus on improving is holding positions. I excel at large bets but am very poor at holding positions with substantial unrealized profits. This is my internal risk management awareness at play, but if I could apply my theories more often instead of frequently trading, I would go further.
