Think back to the people around you who love to talk about trading—
His opening remarks were always: "This pattern is a triple bottom," "There's an evening star pattern here," and "This moving average is incredibly accurate."
When discussing risks, just say this:
"Don't worry, this time it's not a big problem, I have a feeling."
Those who truly care about position sizing and the maximum potential loss per trade...
People who know when to stop losing money are extremely rare.
The result is:
Earning incomplete amounts at the right time
When you're wrong, you lose everything.
After one round of market fluctuations, my technical skills have indeed improved, but my account is gone.
Today's article will break down and explain this sentence in detail:
"Those who cannot control their positions are not qualified to talk about technical analysis."
No matter how skilled you are, if you get wiped out by over-leveraging, it's all for nothing.
I. What is position management? In short...
Don't be intimidated by all the technical terms; let's start with something in plain language:
Position management = how much capital you use to validate a potentially wrong idea.
Every order you make is essentially based on one assumption:
I think the price will go up/down.
I think this position has support/resistance.
It is possible to make a wrong assumption.
The job of position management is:
Even if I'm wrong, I'll only lose by a small amount.
It's not like you'll choke to death in one breath.
People who manage their positions well:
I will lose, but each loss will be limited.
Even if you make several mistakes in a row, you can still survive, review, and adjust.
People who haphazardly allocate their positions:
When it's right, it's incredibly satisfying.
One mistake and you're half dead.
What you really need to practice is not "never making mistakes".
Rather, it means "when you make a mistake, you can only afford to lose a little."
II. Same technical analysis, different position sizes = completely different outcomes
To give a very real example.
Suppose you and your friend use the same strategy and open long positions at the same entry point:
100 for entry
The stop-loss is set at 95% (admitting a 5% loss).
The goal is 110 (the part where you eat 10%).
But the positions are different:
You: Be more stable
Total funds: 10,000 U
Risk per transaction: 1% (meaning a maximum loss of 100 USDT)
Open a position of 2,000 USDT for this trade, and set a stop-loss order when it drops to 95.
Loss ≈ 2,000 × 5% = 100U = 1% of total capital
Friend: A little bit above
The total funding is also 10,000U.
But to put it simply:
"Such a great opportunity, it would be a waste not to invest heavily!"
I opened a 10,000U position with no stop-loss order.
First drop to 95: Unrealized loss of 500 USDT (total capital -5%)
In a panic, I added to my position to average down.
If it drops a little further, I might hold on until I collapse or get liquidated.
As it turned out, the price did indeed rise to 110.
You might be someone who loses a small 1% on the first trade, then makes it all back in the next one.
He likely sold at the bottom because he couldn't hold on any longer, and now he's too scared to get back on.
Same technology, same location
The only difference is the position size.
Their fates were completely opposite.
That's why I said:
Those who don't know how to manage their positions will never enjoy the benefits of "technological progress".
If you heavily invest and then miss the opportunity, all your accumulated wealth will be wiped out.
III. Several typical "position suicide" trading strategies
Check how many of these apply to you 👇
① Once you've made up your mind, go all in:
"This is a rare opportunity; I'd be doing myself a disservice if I didn't take advantage of it."
The ordering logic of this type of person is very simple and straightforward:
I think the opportunity is good
Just throw all the usable money into it.
Sometimes, a higher leverage is also needed.
The question is:
No technological form is 100% correct.
Even if your win rate is 60%
Going all in and hitting that 40% mark...
All your previous 60% of correct work was for nothing.
This kind of person isn't making a deal.
He was looking for "a bargaining chip for a turning point in his life."
② The more you lose, the more you buy:
"Add a little more, and we'll leave once we break even."
This is a typical example of the last-hitting strategy:
First order: The position size is already quite large.
Market trend reversed:
"It's alright, we'll just spread out the costs."
Reverse again:
"Just add a little more, and we can leave once it bounces back a bit."
Continue until:
You could have withstood the pullback
You yourself added "just enough to kick the price to the margin call level".
You weren't killed by the market.
It was because we gradually eroded our safe distance.
③ He usually trades with very small positions, but when he gets excited, he suddenly goes all in.
Many people are usually very "restrained":
Hundreds of kilobytes, thousands of kilobytes, try them out in my small warehouse.
I believe I have a "good sense of risk."
But as long as you encounter:
A piece of news that I particularly like
A certain KOL strongly recommended buying.
A plot involving a "last chance to get on board"
They will suddenly change their expression:
"This time I have faith, I'm going all in this time."
turn out:
All "rational position control",
Nothing can compare to your one moment of infatuation.
Position management isn't about how cautious you are most of the time.
Instead, it looks at "the times when you're most likely to get carried away".
Can we uphold the bottom line?
④ The positions appear diversified, but are actually highly concentrated.
There is an even more covert method:
He felt very scattered:
BTC 20%
ETH 20%
SOL 20%
Various mainstream 20%
Counterfeit 20%
It appears to be "diversifying risk".
In reality—
In the same direction,
Different codes,
100% of the position was invested at once.
As long as the market experiences a major overall downturn:
All of them turned green together
You didn't achieve "dispersed" at all.
Instead, it is "a consistent heavy investment by multiple aliases".
A very important common sense in position management:
Stocks that rise and fall in tandem with each other should not be treated as having "multiple lives".
They are "different incarnations of the same great life".
IV. So what exactly does position management entail? Just three things.
1) What is the maximum loss allowed per order?
This is the first bottom line.
For example, you can set a simple rule for yourself:
Maximum loss per trade = 1%–2% of total capital
10,000U account
Maximum loss per order: 100-200 USDT
At this point, you need to work backwards:
The stop-loss distance is 5%.
The maximum nominal position that can be opened for this order is 100 / 0.05 = 2,000U.
No matter how much you like it, enjoy it, or get excited about it,
This order can only be placed with a maximum position of 2,000 USDT.
Don't give more just because of your "feeling".
2) How many chips are bet in total on the same direction/thinking?
for example:
Do you think BTC will rise?
You also bought ETH, SOL, and other mainstream cryptocurrencies.
Then you need to ask yourself:
Is this actually all gambling?
Is it true that "the market is going to rise"?
If so, then you need to give this direction a total upper limit:
for example:
All positions related to the "mainstream bullish trend" added together
The total amount should not exceed 40%–50% of the total funds.
Otherwise you will become:
You think you have many small positions.
In factAll in on one direction。
3) What is the maximum extent of the loss today/this week?
This is the second bottom line: the circuit breaker mechanism.
It's very simple:
Losing 3%–4% of total capital in a single day
Stop immediately and do not place any new orders that day.
Triggered twice in a week
For the remainder of this week, we will focus on post-mortem analysis rather than live trading.
The significance of doing this is not just about "saving money".
More importantly:
To prevent you from being in the worst situation,
Driven by strong emotions, recklessly allocate the largest positions.
V. A "Positioning Beginner's Template" for Trading Beginners (You can directly copy and use it)
You don't need to pursue any advanced models yet.
First, use a user-friendly, executable version:
Let's say your contract/trading capital is 10,000 USDT.
① Single transaction risk: controlled within 1%–2%
Maximum loss per stop-loss: 100–200 USD
You can use this to work backwards to determine the position size:
If the stop-loss distance is 5%, the position size is approximately 2,000–4,000 USDT.
If the stop-loss distance is 10%, the position size is approximately 1,000–2,000 USDT.
The core issue is not "how big it can be opened".
Instead, it's "I can afford to lose money even if I'm wrong."
② Leverage limit: Draw a red line for yourself that you can never cross.
For beginners / Basic knowledge stage:
Leverage limit: 1–3 times
Becoming slightly more proficient involves having a system, stop-loss orders, and records:
Gradually test the waters to within 5 times.
You didn't become stronger through high leverage.
It becomes stronger through technology and execution.
Leverage only amplifies your current skill level and your mistakes.
③ Total openness in the same direction: not exceeding 50%
for example:
You simultaneously opened long positions in BTC, ETH, and some altcoins.
If these targets are highly correlated, then they can be considered a "direction".
Give this direction an upper limit:
for example:
All of these combined account for a maximum of 50% of the total funds.
The remaining 50% are either out of the market or in other directions (or simply do nothing).
Even if the general direction is wrong:
You lost a portion of the 50%.
Instead of being swept away by a single trend with all your funds.
④ Circuit Breaker Today: Set a point at which the system will shut down if the daily loss reaches a certain threshold.
You can order:
Net loss of ≥ 3% per day (including stop loss and transaction fees)
→ All new positions will be closed that day; only existing positions can be closed. No further action will be taken.
Many people don't lose because of their lack of skill.
The loss was due to a particularly bad day, but the more they lost, the more they wanted to make up for it.
Give yourself a hard stop:
That's enough for today, come back tomorrow.
This is more useful than learning 10 technical indicators.
Sixth, the ability to control position size is the true threshold for discussing technical skills.
You can understand it this way:
Technical analysis = How you read charts, how you interpret logic, and how you calculate market trends.
Position size = How much you're willing to pay for a potentially wrong viewpoint.
Many people are currently in the following state:
He said he wanted to become a "professional trader".
On one hand, it uses a "full position + high leverage + no stop loss" approach to execute...
This is like:
You said you wanted to be a pilot.
The result was that he started driving a fighter jet while drunk.
True expertise begins with learning.
They won't be permanently eliminated from the market because of a single misjudgment.
————————————————————————
That's why I often say that:
"Those who cannot control their positions are not qualified to talk about technical analysis."
It's not that I look down on people,
Rather, it's because:
No matter how good your skills are, it can't stop you from going all in at once when you're feeling high.
Even if the logic is sound, if you don't use stop-loss orders and keep adding to your position as you lose more, it won't work.
No matter how high your win rate is, a single mismanagement of your position can wipe out all your gains.
For trading novices
What you should be practicing right now isn't "the next magic indicator".
Instead, it's these seemingly uncool but incredibly dangerous little things:
How much loss can I in each trade?
How much pressure is applied in the same direction?
If I lose a certain amount of money today/this week, I'll have to stop trading immediately.
(Trading for Beginners 101) This series
It's about explaining to you these things that "nobody wants to talk about, but which determine whether you can survive."
If you already have this feeling:
Sometimes you can tell the direction quite well.
But I lose my composure when I put too much money in, and I can't withstand a series of losses.
Despite possessing some technical skills, they always seem to be dragged down by one or two large losses.
Then come find me.
I will cover the entire topic of position sizing, leverage, stop-loss orders, and circuit breakers.
We'll help you build a "position model" that you can execute yourself.
As for how far you can go, it depends on how tough and self-disciplined you are on yourself.
