First, a summary: Rolling positions are high-yield operations, but they also come with extremely high risks, so caution is essential. The strategy of rolling positions (exponential growth) + compound interest model is the high cost-performance strategy. Note that rolling positions mean exponential growth, while compound interest is a specific manifestation of exponential growth, meaning all compound interest is exponential growth, but not all exponential growth is compound interest. Spot trading is the compound interest model, while futures are more like linear growth. In summary, effectively utilizing (unrealized profits) is the core of rolling positions and compound interest!

Now let's officially talk about rolling positions.

With a 5,000 principal, 10x leverage, and a single wave of 100% increase, the final profit is 5 million; this is rolling positions.

Floating profit accumulation is not rolling positions. Because the definitions and methods of rolling positions available in the market are all directly copied and pasted from the views of Fatty, Bitcoin King, and Tony. For beginners without much investment experience, it is still not simple and easy to understand. This article aims to provide a straightforward explanation.

Assuming BTC is currently priced at 10,000, with a 5,000 position and 10x leverage. At this point, BTC rises to 11,000, with an increase of 10%; your profit is 5,000. OK, the next operation is very important.

1. The method of floating profit accumulation is to add another 5,000, and then BTC rises to 12,000, increasing by 10%. At this point, your total amount including principal and profit is 25,000 (2 principal of 5,000 + 3 profits of 5,000).

2. The method of rolling positions is to close the previous position, total amount including principal and profit is 10,000, then open a new position. Subsequently, when BTC rises to 12,000, with the same increase of 10%, your total amount including principal and profit is 20,000.

Looking at it this way, is there really no difference? But as long as you keep cycling through the operations, when BTC rises to 20,000, the increase is 100%. The total profit including the principal and interest from floating profit accumulation is 325,000 (including 50,000 principal). The total profit from rolling positions is 5,120,000 (including 5,000 principal).

Why is there such a big difference? Let’s analyze it together.

What is a complete position building cycle?

Open position → floating profit → floating profit → close position and exit

What is a complete floating profit and accumulation cycle?

Open position → floating profit → additional position → floating profit → close position and exit

What is a complete rolling position cycle?

Open position → floating profit → close position → open position → floating profit → close position and exit

OK, here are two more concepts, explained in a simple way. One is linear growth, which means growing by 10%, 10%, 10%. The other is exponential growth, which means growing by 10%, 20%, 40%, 80%. Linear growth is like driving a car and gradually accelerating from 10 mph to 20 mph to 80 mph in a smooth manner. Exponential growth, on the other hand, is like technological advancement, which grows at an increasing rate; it starts off slowly but accelerates over time. Here is an unrigorous example for understanding: concrete evidence shows that humans became proficient in using fire 400,000 years ago, electricity 200 years ago, cars about 100 years ago, the internet 55 years ago, and mobile internet 30 years ago. This means that after electricity was mastered, human technology advanced rapidly. In comparison, those previous 400,000 years seem trivial. Getting back on track.

Here we can draw an analogy:

Ordinary position building is linear growth. Strictly speaking, contracts are not considered linear, but this analogy is made for easier understanding.

Floating profit accumulation is based on linear growth, with additional accumulation.

Rolling positions lead to exponential growth.

Here’s a manually calculated diagram for a visual understanding. Each circled 5,000 represents additional principal added from floating profit accumulation.

At this point, doesn’t everyone think, wow! It's so simple! Isn’t this the secret to wealth? But in reality, the operation of rolling positions has a strict set of essential conditions: capital management, profit-taking and stop-loss, and the most important prerequisite—unidirectional bull market conditions. The greatest risk behind such high returns is facing a drawdown of more than 10%, leading to total loss of capital. However, I personally believe that through reasonable profit-taking and stop-loss strategies, it can still be controlled. If we really encounter such a major market that happens once every four years, it can be utilized.

Summary: The high yield of rolling positions also comes with extremely high risks, so caution is essential. The strategy of rolling positions (exponential growth) + compound interest model is a cost-effective strategy. Note that rolling positions mean exponential growth, while compound interest is a specific manifestation of exponential growth, meaning all compound interest is exponential growth, but not all exponential growth is compound interest. Spot trading is the compound interest model.

In the next article, I will analyze the application of the rolling position + compound interest model in the futures market. I personally believe that among the many experts who stood out in the last bull market, their operating methods are highly representative. Ordinary people with small capital have achieved a turnaround from 40,000 to 200 million in just over two years. I am keen on studying the legendary stories of these individuals—not to imitate them to grasp some wealth secret, but simply because I find the ups and downs of their lives particularly interesting, just like watching a good movie. If during this time I can also improve my trading skills and concepts, it would be killing two birds with one stone, wouldn’t that be wonderful!

Many friends say that the increase shown in the diagram is based on 10,000, but actually, you can view the 10% and 20% in the diagram as stage increases; the essence is completely the same. It's just to make the understanding of compound interest more intuitive; for more details, see the diagram below.

The above analysis indicates that the true meaning of rolling positions lies in compound interest, and the true meaning of compound interest is to fully mobilize unrealized profits, which is the floating profit portion. Some people leveraged 40,000 to achieve 200 million, which is essentially compound interest thinking. Compound interest thinking is the only possibility for earning big money with a small capital—mark my words, it is the only way! Earning a few waves this week and losing a few waves next week, such a completely unstructured way of trading futures cannot lead to big profits; even breaking even is very difficult.

Secondary summary: Earning big money with a small capital has 3 points: 1. Compound interest thinking. 2. Bull market conditions. 3. Correct operations. If all three points are met, congratulations, this is a sufficient and necessary condition for leveraging small amounts for large gains!

Finally, this compound interest thinking also applies to spot trading, which is a 100% annualized rate. With the same 5,000 principal, after 6 cycles, it can reach 320,000. After 11 cycles, it can reach 10,240,000; more specifics can be found in another article of mine. Achieving this is much easier.