Position Reduction Technique: Rolling Position Method
The core dilemma of trading lies not in trend judgment, but in price reversals—nowadays price reversals are more frequent and larger, making it difficult for both bulls and bears to profit. If the market were entirely one-sided with no reversals, trading would be simpler, but in reality, one must deal with reversals.
After determining the trend direction, the key is managing reversals: when to reverse and how much? No matter how advanced the technology, it is difficult to predict all reversals, most of which occur without warning. Instead of overly relying on technical analysis, it is better to use position management to cope, and the rolling position method is a practical strategy.
Core Logic of Rolling Position:
1. Position Limit: Total position control at 5% (reasonable for high-leverage varieties), no additional positions after reaching the limit.
2. Rolling Rules: If you want to continue increasing positions (believing the market is not over), first close the 'profitable orders'—the ones with the most favorable entry prices and the highest profits (not necessarily the earliest opened), then open a new position of equal amount.
◦ Example: Shorting EURUSD, with existing positions at 1.2500, 1.2300, and 1.2100, when the total position reaches 5%, if one wants to add to the position, first close the 1.2500 position, then open a new short position.
◦ Usually, closing positions does not exceed 1/3 of the total position (approximately 1.6%), in special circumstances, half can be closed, flexible management is key.
3. Core Objective: Maintain a constant total position, realize part of the profits in advance, and avoid collective shrinkage of all positions when price reverses, while also stabilizing mindset.
Key Reminder:
• When there are no plans for additional positions, do not close profitable orders to avoid turning long positions into short ones.
• Take profit and new positions need to be of equal amount, and the interval should avoid significant market fluctuations.
• This method originates from the hook shape theory, and may differ from other 'rolling positions', so do not confuse them; position management has no absolutes, finding what suits oneself is most important.
Rolling positions are not the only solution, but they can help you protect profits and control risks in a reversal market. Independent thinking and finding a suitable strategy is the key to long-term trading.
