Author: Cryptocurrency Integration Brother
Link: https://www.zhihu.com/question/536148662/answer/3403964440
Source: Zhihu
Copyright belongs to the author. For commercial reproduction, please contact the author for authorization; for non-commercial reproduction, please indicate the source.

To summarize: Rolling positions are high-yield operations, but they also carry extremely high risks; caution is necessary. The combination of rolling positions (exponential growth) + compound interest is a high cost-performance strategy. Note that rolling positions are exponential growth, while compound interest is a special form of exponential growth. All compound interest is exponential growth, but not all exponential growth is compound interest; spot trading is the compound interest model, and futures are more like linear growth.

Now let’s officially start discussing rolling positions.

With a principal of 5000 and 10x leverage, a 100% increase ultimately yields a profit of 5 million; this is rolling positions.

Adding to floating profits is not rolling positions. Currently, the definitions and methods of rolling positions on the market are all direct copies of opinions from Feizhai, Bit King, and Tony, which are not easy to understand for novices with little investment experience. This article aims to explain it in a straightforward manner.

Assuming the current price of BTC is 10000, and you open a position of 5000 with 10x leverage. If BTC rises to 11000, a 10% increase means you’ve made 5000. OK, the next steps are crucial.

1. The method of adding to a floating profit involves adding another 5000. Then, if BTC rises to 12000 and increases by 10%, you will have a total of 25,000 (principal of two 5000 + profit of three 5000).

2. The method of rolling positions involves closing previous positions, totaling 10000 with principal and profit, then opening a new position. If BTC rises to 12000 with the same 10% increase, your total with principal and profit will be 20000.

Looking at it this way, isn’t there much difference? But as long as you keep operating in a loop, when BTC rises to 20000, the increase is 100%. Adding to floating profits will ultimately yield 325,000 (including 50,000 principal). Rolling positions will yield 5,120,000 (including 5,000 principal).

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

What is a complete position opening cycle?

Open position → Floating profit → Floating profit → Close position

What is a complete floating profit addition cycle?

Open position → Floating profit → Increase position → Floating profit → Close position

What is a complete rolling position cycle?

Open position → Floating profit → Close position and reopen → Floating profit → Close position

OK, let's extend two concepts here in an easy-to-understand way. One is linear growth, which increases by 10%, 10%, 10%. The other is exponential growth, increasing by 10%, 20%, 40%, 80%. Linear growth is like driving a car, steadily accelerating from 10 to 20 to 80 mph. Exponential growth, on the other hand, is like technological development, which grows exponentially, starting slowly and accelerating over time. Here’s a rough example for understanding: based on concrete evidence, humans mastered fire around 400,000 years ago, electricity about 200 years ago, cars roughly 100 years ago, the internet 55 years ago, and mobile internet 30 years ago. This means that once electricity was mastered, human technology advanced rapidly. Comparing the previous 400,000 years seems trivial. But back to the point.

Now let’s compare it again:

Ordinary position opening is linear growth. Strictly speaking, contracts are not linear, but for the sake of analogy, this is easier to understand.

Adding to floating profits is just adding to the linear growth.

Rolling positions represent multiplicative exponential growth.

Here’s a manually calculated chart for a more intuitive view. The circle around 5000 represents the additional principal added from floating profits.

Author: Cryptocurrency Integration Brother
Link: https://www.zhihu.com/question/536148662/answer/3403964440
Source: Zhihu
Copyright belongs to the author. For commercial reproduction, please contact the author for authorization; for non-commercial reproduction, please indicate the source.

At this point, do you think, wow! It’s that simple! Isn’t this the wealth code? But in reality, rolling positions come with a set of stringent prerequisites: capital management, stop-loss and take-profit strategies, and the most important premise— a bull market with one-sided upward trends. The biggest risk behind such high returns is that encountering a pullback of more than 10% can lead to total loss. However, I believe that with reasonable stop-loss and take-profit strategies, it can be manageable. If we really encounter such a rare market event that happens once every four years, it can be utilized.

Summary: The high returns of rolling positions come with extremely high risks; caution is essential. The combination of rolling positions (exponential growth) + compound interest strategy is relatively cost-effective. Note that rolling positions are exponential growth, while compound interest is a special form of exponential growth. 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 rolling positions + compound interest in the futures market, as well as the story of Bit King. Why mention Bit King? Because I personally believe his operation method is highly representative among the various experts who broke out in the last bull market. An ordinary person with a small principal turned 40,000 into 200 million in just over two years. I am keen on studying the legendary stories of these people, not to replicate their methods for wealth, as their stories often have an irreproducible nature. I simply find it interesting to appreciate the ups and downs of their lives, like watching a great movie. If I can also improve my trading skills and concepts during this time, that would be killing two birds with one stone, wouldn’t it be wonderful!

If you've read this far, it means you somewhat agree with my perspective. Please give a thumbs up, and wish you great success in 2024!!!!

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