Last year, I spent a full 11 months trading contracts, growing from 2000U to over 2 million U, a 1000-fold increase! It all relied on one tactic: 'position management.' Once you master it, the crypto world can truly become your 'ATM,' making money as natural as breathing!
If you really plan to root yourself in the crypto world for the next three years and treat it as your primary profession, make sure to engrave these 10 operational insights in your mind; after reading them, you will definitely thank me!
The six basic principles of position management, remember them to avoid many pitfalls:
First: Don't put all your money in; you must keep some 'backup funds.'
Second: Buy and sell in phases to reduce risk, lower costs, and increase returns. Buying in phases downwards can get a lower average price, while selling in phases upwards can earn more price difference.
Third: When the market is weak (bear market), play lightly; ideally, don't exceed 50% position; when the market is strong (bull market), you can hold a bit more, but don't exceed 80%, leaving 20% for short-term or emergency use.
Fourth: When the market changes, adjust your position accordingly—add when needed, reduce when needed.
Fifth: When the market is sluggish, you can temporarily stay out of the market and wait for opportunities; don’t stubbornly hold on.
Sixth: Be decisive in changing positions—keep the coins that are rising sharply and sell those that are stagnant.
These six points apply whether trading spot or contracts. If you don’t understand, read them several times to reinforce your knowledge; only by understanding can you teach others!
Let's talk about the specific methods of position management: phased operations.
Phased operations mean dividing the invested money into several portions, building positions, increasing, or decreasing in several rounds. This can be completed in one day or extended over several days.
Why do this? Because the crypto market is like a roller coaster, rises and falls are hard to predict, and no one can accurately guess if the next moment will be up or down. Keeping enough funds to cope with fluctuations is essential to avoid being 'slapped in the face.'
If you're not confident and go all in, a reversal in the market could lead to significant losses. Gradual operations can reduce the risk of an all-in position and can lower costs, serving as the basis for 'minimizing losses and maximizing profits.'
Phased operations are divided into two types: equal portion phased and non-equal portion phased.
First: Equal portion phased (rectangle method). Divide the funds into several equal portions, with the same amount of money for each buy/sell. Commonly used are 3 or 4 portions. For example, first buy 30%, if profits are made, buy another 30%, if no profits, stop first; sell by reducing positions in phases when the price rises to a high point or the market changes.
Second: Non-equal portion phased (for example, pyramid method). Funds are allocated in different proportions, such as 1:3:5, 1:2:3:4. The commonly used method is the pyramid type: buy more at lower levels, and less as you go up.
For example, a comparison:
Pyramid: Buy 5 layers at 1000, 3 layers at 1100, 1 layer at 1200, average price 1055
Inverted Pyramid: Buy 1 layer at 1000, 3 layers at 1100, 5 layers at 1200, average price 1144
Equal Portion Rectangle: Buy 3 layers at 1000, 3 layers at 1100, 3 layers at 1200, average price 1100
When the price rises to 1200, profit: Pyramid 145, Inverted Pyramid 56, Rectangle 100;
When the price drops back to 1000, loss: Pyramid +55 (near break-even), Inverted Pyramid -144, Rectangle -100.
The clear pyramid has the lowest cost, earns more when the market rises, and can withstand declines; the inverted pyramid is the opposite, suffering severe losses when the market falls. Therefore, in practice, buying should use a regular pyramid (buy more as prices drop), and selling should use an inverted pyramid (sell more as prices rise) for better reasoning.
For example, when the coin price drops to 10U, first buy 20%; if it drops to 8U, add 30% (average cost 8.6U); if it drops to 5U, add 40% (average 6.5U). When it rebounds to 10U, you earn directly 3.5U, which is much faster than getting out of a full position bought at 10U.
When prices rise, the lower the price, the heavier you buy, and the higher the price, the less you buy (building positions on the right side), ensuring cost safety; as long as it doesn’t drop below your holding price, there’s no need to panic. However, the first time entering the market should be precise, suitable for experienced traders who understand the technology.
The inverted pyramid selling method is the opposite: the higher the price rises, the more you sell (shaped like a funnel), which can lock in more profits.
Understanding these concepts, whether building positions in spot or contracts, gives you a clear mindset.
If you are trading contracts, remember these eight points! Key!
Contracts are 'betting small to gain big'; losing money is normal, but after a stop-loss, people fall into two categories: some are eager to open a position to 'recover losses,' while others stay calm. It’s advisable to stop and adjust your strategy when frequently hitting stop-losses.
Don't think about getting rich overnight; don’t overreact when losing money, and don’t go all in.
Identify the big trend! In a one-sided market, go with the trend, don’t go against it—going against the trend is the root of losing money, and both novices and veterans easily make this mistake. Once a trend forms, counter-trend operations will be 'taught a lesson' by the market; learn to wait for opportunities in the trend.
The win-loss ratio must be managed well! Profits should be at least double the losses (for example, earn 2, lose 1), otherwise, it’s hard to make money.
Frequent trading is a big taboo in contracts! Novices should not open positions recklessly, always trying to 'catch every opportunity,' which usually results in losses.
Only earn the money you understand; don’t touch 'opportunities' outside your comprehension.
Don’t stubbornly hold positions! Holding positions in contracts is the beginning of the abyss; novices must strictly enforce stop-losses.
Don’t get carried away when making money; getting carried away will definitely lead to losses.
I am Wenhua, a professional analyst and educator, a mentor and friend on your investment journey! As an analyst, the most basic role is to help everyone make money. I will help you resolve confusion and trapped positions, speak with strength, and when you lose direction and don’t know what to do, follow me, and Wenhua will point you in the right direction.
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