I have seen too many crypto traders fall into the same pit: the trend judgment is spot on, and the timing of adding to their winning positions is also right, yet a slight pullback leads to direct liquidation, watching the profits that should have been theirs turn into bubbles.
This is not bad luck, but rather a failure to understand the core trap behind the rolling position's margin mechanism and the dynamically changing liquidation price. As an analyst who has been in the crypto market for 8 years, I dare say: the essence of rolling positions is not to 'make more', but to 'control risk'. Today, in the most straightforward language + practical cases, I will dissect the underlying logic of rolling positions so that you have a clear account in mind when you increase your position next time.
One, first understand: the core logic of scaling and the two key margin modes.
The essence of scaling is simple: use the floating profits of existing positions as 'principal', do not open new positions or add your own funds, allowing the position to continue to expand in the trend. But whether it can be realized and how much risk there is depends entirely on the margin mode you choose - this is the premise that beginners most easily overlook.
1. Incremental mode: The 'insulator' of scaling, risk isolation but insufficient flexibility.
The core of incremental mode is 'independent positions': the margin for each position is frozen separately, without interfering with each other. The benefits are obvious: even if one position is liquidated, the loss is limited to that position's margin, and will not affect other funds in the account, essentially adding a wall of isolation to risk.
But for scaling, there is a deadly limitation: unrealized floating profits cannot be directly used to open new positions. Only after you close positions and realize profits can this money become available margin. So, strictly speaking, there is no 'real-time scaling' in the incremental mode; at most, it can be considered 'reinvesting after profit', which is not the same as what we call 'rolling profits into new positions'.
2. Full margin mode: The 'main battlefield' of scaling, profits and risks are tied together.
True scaling can only be realized in full margin mode. Here, all positions share a margin pool, and unrealized floating profits directly increase available margin - without needing to close positions, you can directly open new positions with floating profits; this is also the key to scaling 'getting bigger'.
But behind the convenience is risk linkage: a floating loss in one position will directly erode the entire margin pool, causing the liquidation prices of all positions to approach the current market price. This is why many people feel 'it's easier to liquidate after scaling' - it's not the market targeting you; in full margin mode, profits and risks are inherently interconnected.
Two, core insights: In full margin mode, how does the liquidation price 'dynamically drift'?
The core of scaling risk control is understanding the changing laws of liquidation prices. Simply put: when your account equity (initial margin + available balance + unrealized profits and losses) falls below the maintenance margin needed to cover all positions, liquidation will be triggered. A more straightforward understanding is: the moment available margin is exhausted by floating losses, that is the critical point of liquidation.
1. Core formula for long scenarios (simplified version, accurate enough for practice).
Liquidation price ≈ Opening price - (available margin + initial margin) / position size
Remember this formula, and you can predict the impact of scaling, floating profits, and floating losses on risk. Below, I will break it down with specific cases; all values are close to the real market, and beginners can understand them.
2. Practical case: 50x leverage long BTC, see how the liquidation price changes.
Assuming premise: you open a 1 BTC long position with 50x leverage at a price of 20000 USD, with an initial available margin of 2000 USD.
(1) Initial state: liquidation price 18000 USD.
The first step is to calculate the initial margin: initial margin = opening price ÷ leverage = 20000 ÷ 50 = 400 USD.
Substituting into the formula to calculate the liquidation price: 20000 - (2000 + 400) / 1 = 18000 USD. At this point, as long as BTC does not fall below 18000 USD, your position is safe.
(2) Situation One: Price rises, floating profit increases, but the liquidation price actually rises after scaling.
When BTC rises to 22000 USD, your floating profit = (22000-20000)×1=2000 USD. At this point, the available margin is updated to: initial available 2000 + floating profit 2000 = 4000 USD.
You decide to scale with floating profits: open one BTC long position at 22000 USD. The initial margin for the new position = 22000 ÷ 50 = 440 USD.
Key data after scaling: total holding 2 BTC, average opening price ≈ 21000 USD; total initial margin = 400 + 440 = 840 USD; available margin = 4000 - 440 = 3560 USD.
New liquidation price calculation: 21000 - (3560 + 840) / 2 = 21000 - 2200 = 18800 USD.
The key point is: although you made money and increased your position, the liquidation price has risen from 18000 USD to 18800 USD - the risk threshold is now closer to the current market price (22000 USD)! This is what I often call the 'profit curse of scaling': every time you scale in, you are quietly increasing your risk exposure, even if you seem to be making more.
(3) Situation Two: No scaling, original position floating loss leads to liquidation price approaching market price.
Assuming BTC does not rise but falls to 19500 USD, your floating loss = (20000-19500)×1=500 USD.
At this point, available margin = initial 2000 - floating loss 500 = 1500 USD.
New liquidation price = 20000 - (1500 + 400) / 1 = 18100 USD.
It seems the liquidation price has dropped from 18000 to 18100, which appears to be safer? But be aware: the current market price is 19500 USD; the distance between the liquidation price and the market price has shrunk from 2000 USD to 1400 USD! If you rashly scale in at this point, the new position will directly use up the margin, further reducing the available balance, and the liquidation price will be closer to 19500 USD, doubling the risk.
Three, the four major pitfalls beginners must avoid in scaling; I will highlight key points to avoid.
In the liquidation cases I have seen, 90% cannot escape these four pitfalls. Remember these avoidance guidelines, which can help you lose much less money.
1. Pitfall 1: Forcing scaling in a volatile market - the trend is the lifeblood of scaling.
The core premise of scaling is a 'strong one-sided trend'; a volatile market is the nemesis of scaling. Frequent scaling in a volatile market will only lead to frequent stop-losses, gradually eroding the principal. My judgment standard: Only when the market breaks through a long-term horizontal range and stands firm at key resistance/support levels, or when a healthy correction in the trend ends, is it suitable to consider scaling.
2. Pitfall 2: High leverage + dense scaling - leverage is the root of risk.
Many beginners feel that 'scaling requires high leverage to earn quickly', often entering with 50x, 100x leverage. But I want to emphasize: scaling itself is not a source of risk; high leverage is. My personal operating habit is to keep the total leverage of scaling at 2-3 times, slowly expanding the position size relying on floating profits, rather than starting with heavy bets.
3. Pitfall 3: No moving stop-loss - the lifeline of profit cannot be missed.
Scaling is not about 'opening positions and lying flat'; rather, it requires stricter stop-loss discipline. My approach is to set moving stop-losses for the overall position, allowing the stop-loss level to rise with profits. For example, when profitable by 10%, set the stop-loss above the cost price; when profitable by 20%, raise the stop-loss to the position of 10% profit. This way, even if the market corrects, you can retain most of your profits and won't 'ride the roller coaster' to liquidation.
4. Pitfall 4: Misunderstanding the sequence of liquidation - In full margin mode, 'a loss leads to all losses'
Many beginners think 'the first opened position is the first to liquidate', which is a major misunderstanding in full margin mode. In full margin mode, all positions sharing the margin are 'born and die together'; when the total equity in the account is insufficient to maintain all positions, the system will liquidate all positions at once, with no order of precedence.
Four, my personal insights on scaling risk control, three iron laws learned from lessons.
These insights are summarized after I've stepped into many pitfalls and lost a lot of money; they are highly practical.
1. Incremental mode: The 'insulator' of scaling, risk isolation but insufficient flexibility.
My iron law: the funds for scaling must be 'profits that have already been realized'. For example, if you used 10,000 USD as principal to earn 5,000 USD, first withdraw the 10,000 USD principal, and then use the remaining 5,000 USD for scaling. Even if this 5,000 USD is completely lost, it will not affect your core principal and trading mindset; this is the 'safety bottom line' of scaling.
2. Use the pyramid scaling method; the higher it rises, the less you scale in.
Scaling cannot be 'averaged out'; it should be pyramid-like: first open 1 lot, then scale in 0.7 lots, then scale in 0.5 lots, decreasing each time. This effectively lowers the average holding cost and avoids over-leveraging at the end of a trend; even if the market reverses, losses can be controlled within an acceptable range.
3. Actively extract part of the profit to lock in gains.
When a trend allows you to gain huge floating profits, do not be greedy for 'earning more', but actively close part of your position and extract some profit. For example, when floating profits reach 50% of the principal, extract 20% of the profit; when floating profits reach 100%, extract 30% of the profit. This greatly enhances your risk tolerance, allowing you to accept subsequent market corrections with a smile.
Finally, a heartfelt statement.
Scaling is a double-edged sword; it can help you amplify profits in a trend but can also instantly wipe out your profits. It is not a 'shortcut to profit' for beginners but an 'advanced strategy' that requires precise risk control capabilities.
In the crypto market, 'surviving longer' is always more important than 'earning faster'. If you have encountered confusion about 'seeing the trend but losing everything' in scaling operations, or have questions about calculating the liquidation price, feel free to leave a message in the comments; I will answer them one by one.
