In the cryptocurrency market, many people focus all their energy on 'finding bull coins' while neglecting the most core survival skill — position management. In fact, even if you pick the right coins, poor position management can lead to devastating losses; conversely, good position management can help you 'have small losses and big gains,' steadily accumulating profits amidst volatility.
The following 8 tested position management rules, from capital allocation to trend judgment, help you avoid 90% of loss pitfalls.
1. Golden Ratio Method: Use 'five equal parts' to lock in risk, only take action with a profit-loss ratio of 5:1.
The core logic is 'putting eggs in five baskets,' using the 'five equal parts capital management rule' to control single trade risk:
1. Capital Division: Divide total capital into 5 equal parts, using only 1/5 of the position for each trade (for example, with 100,000 capital, only invest 20,000 each time);
2. Risk Locking: Set a 10% stop-loss for each trade, which corresponds to a total capital loss of only 2% (10% stop-loss × 1/5 position) — even if you make 5 consecutive wrong judgments, the total loss will only be 10%, and it won't be devastating;
3. Profit Requirement: Set the take-profit target at over 50%. Taking the 20,000 position as an example, a 50% gain is 10,000 profit, compared to a 2,000 stop-loss, the profit-loss ratio reaches 5:1.
With the positive cycle of 'small losses and big gains,' the profit curve will become increasingly stable over the long term.
2. Go With the Trend: Don't go against the trend; adjust positions based on 'direction.'
The core of making profits in the cryptocurrency market has never been 'buying low and selling high,' but 'following the trend':
- In a downtrend: Every rebound may be a trap to lure more buyers, don't think about adding positions when it 'drops enough,' instead reduce positions to avoid risk;
- In an uptrend: Every pullback is a good opportunity to enter, adding positions at this time has a much higher win rate than blindly trying to catch a bottom.
For example, in the 2023 Bitcoin bull market, many entered during the oscillating pullbacks, with a success rate 67% higher than those 'betting the bottom' during declines — when the trend is right, position is useful; when the trend is wrong, even a small position can incur losses.
3. Avoiding the Trap of Explosive Growth: Don't touch coins that surge over 50% in the short term, no matter how tempting.
Coins that surge in the short term (e.g., 300% in 72 hours) may seem like 'money-making opportunities,' but are actually the sword of Damocles hanging over your head:
Most of these coins are products of speculative trading with no fundamental support; once the hype fades, they will 'plummet off a cliff.' Data shows that coins that surge over 50% in the short term have a 95% chance of giving back all gains within two weeks, and many who chase them become 'bag holders.'
Remember: Truly good coins do not 'rise in a hurry'; a slow and steady trend is more sustainable.
4. MACD Dual Sword Combination: 'Zero-axis crossover' is a signal of trend reversal.
The MACD indicator does not require complex analysis; understanding the 'zero-axis crossover rule' is enough, as it's key to judging bullish and bearish transitions:
- Entry Signal: When the DIF line and DEA line form a 'golden cross' below the zero axis (DIF crosses above DEA) and both break through the zero axis, it indicates a transition from bearish to bullish, enter positions at this point, with a very high win rate;
- Exit Signal: Conversely, when a 'death cross' forms above the zero axis (DIF crosses below DEA), it is a warning of a bear transition, and positions should be reduced promptly.
For instance, in April 2024, Bitcoin's trend captured an 18% upward wave using this strategy, avoiding subsequent pullbacks.
5. Overturning Cognition: Adding positions is not 'averaging down,' but 'increasing profits.'
Many retail investors lose a lot of money because they mistakenly take adding positions as a lifeline — when the coin they bought drops, they add positions to 'average down,' resulting in losses rolling from 10% to 50%.
The correct approach is 'increase profits, cut losses': Only when the current position is up 20% and the direction is confirmed should you use the profits to build a secondary position. This amplifies gains without touching the principal, and even if there are subsequent pullbacks, losses will only be 'profits,' not affecting the safety of the principal.
6. Volume-Price Secret: Trading volume is the 'thermometer' of trends; observing volume helps identify turning points.
Volume is more honest than candlestick patterns and is key to judging the authenticity of the market:
- Low-level volume breakout: When the coin price is moving sideways at a low level and suddenly surges with increased volume, breaking through resistance, this is a signal of trend initiation, and positions can be built;
- High-level volume stagnation: When the coin price reaches a high level, volume is large but the price does not rise or even falls (for example, at the top of a popular coin in June 2024), it indicates that funds are exiting, and one must exit the market.
Remember the rule of 'high volume high price, low volume low price': When trading volume reaches an extreme, it often signals a turning point in the market.
7. Moving Average Navigation: Use 4 moving averages to lock in ultra-short, medium, and long-term opportunities.
You don't need to look at too many moving averages; focusing on just 4 can cover all trading cycles and help you judge how much position to use:
1. 3-day moving average trending upwards: Suitable for ultra-short trading, capturing short-term volatility opportunities, with a lighter position (1/5 position);
2. 30-day moving average turning upwards: Medium-term trend forming, suitable for swing trading, with a position of 2/5;
3. 84-day moving average rising: Main upward trend is coming, the trend is most stable, and the position can be increased to 3/5;
4. 120-day moving average trending upwards: Long-term trend is positive, suitable for long-term investment, can hold 4/5 position for a long time.
Moving averages represent 'visible trends'; adjusting positions according to the direction of moving averages will not go too wrong.
8. Review Alchemy: Three steps of review every day to make position management increasingly precise.
Position management is not static; it needs daily review and optimization to perform 'three-dimensional reviews':
1. Logical Review: Has the fundamental situation of the held coins changed? For example, project progress, policy impacts, these can alter the long-term trend and affect position weight;
2. Technical Review: Does the weekly candlestick pattern meet expectations? For example, has it broken key moving averages, is the trading volume normal, and adjust short-term positions;
3. Emotional Review: Were the day's trading decisions influenced by market emotions? For example, seeing others bullish leads to increasing positions, or panic selling during declines; these emotional disturbances should be noted to avoid them next time.
Only by continuously reviewing can you find the position rhythm that suits you, becoming more stable.
Finally, a reminder: The core of position management is not 'earning more,' but 'surviving longer.' In the cryptocurrency market, as long as you can protect your principal and not be crushed by a single loss, with the accumulation of experience and profits, wealth upgrade will naturally be achieved. Remember: It's okay to be slow; stability is the key to winning.
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