Position management is like a protocol, an ideology, and an underlying methodology. In a narrow sense, it is about how many coins to buy and how much money to keep in the currency circle. In a broad sense, there are still many expansion points worthy of our attention.
That is to say, there are still many positions that you have not thought of.
When you can flexibly apply the word "position management" in various scenarios, its impact on you will become an all-directional intervention, making you a walking position management machine.
It's worth it to do this.
If you understand most of what I am going to say next, you will be ahead of the vast majority of Coin people in terms of thinking, and not just Coin people, but citizens.
One, personal asset position management
In principle, trading cryptocurrencies can only be considered a type of high-risk asset allocation. Although the returns from trading cryptocurrency assets far exceed those of other traditional financial assets, if you do not have a master-level understanding, it is advisable to invest spare money in cryptocurrency.
What is the standard for spare money? Some people earn tens of thousands every month, some have a large sum of cash, and some cannot even pay off their credit cards. I suggest that the initial capital for trading cryptocurrencies should be within 20% of your 'holding cash.' This is a relatively conservative starting point.
For example, if your monthly salary is ten thousand and you have savings of one hundred thousand, you can take out twenty thousand to trade cryptocurrencies, adding two thousand in capital each month. This ratio is already quite high and should not affect your life, considered spare money investment.
Some people have a solid financial background, with plenty of real estate, but I still require you to start with 'holding cash' rather than total assets. This is for your own responsibility.
As your control ability increases, such as your position management level and understanding of the cryptocurrency market, you can eventually grow to have most of your assets in the cryptocurrency market, and the future will definitely be this way. This is a safer asset allocation method.
But now, please be honest and conservative.
I don’t care about the operating method; simply this first requirement, 90% of cryptocurrency traders cannot meet it. So why do 90% of them lose money? They lack risk resistance.
Some people have little savings or salary, or do not have a salary at all, hoping to turn around in the cryptocurrency market. Almost all their liquid money is in the cryptocurrency market, but they are still at a novice level. Once a bear market arrives, if their assets shrink and there is a slight disturbance in life, they are highly likely to cut losses and leave, joining the ranks of debtors.
Being in debt due to cryptocurrency trading can lead to irreversible consequences.
If you want to rely on the secondary market to turn things around by borrowing to trade cryptocurrencies, it is not impossible, but you have chosen a path of extreme difficulty. There is a huge paradox here: if your level is not high, borrowing is counterproductive because borrowing requires a high level of expertise to play. Really, ask yourself what qualifications you have before making plans.
Two, cryptocurrency asset position management
You have your money ready, and then? Go all-in?
Alright, go all-in, and then lose again at the second hurdle.
With the foundation of the first rule, we have excluded the scenarios of panic selling due to urgent cash needs that lead to a major collapse. However, in a situation where all positions are in a big drop, you can only stare in disbelief. What if you continue to invest cash to increase your position? Breaking the first rule could lead to a downward spiral, ultimately becoming a gambler, which is very frightening.
What to do?
An ideal state is to operate with half the position, meaning you use half of your funds to buy coins, and hold the other half in stable coins. Whenever the coin price rises, your assets appreciate; when the coin price drops, you still have bullets to continue trading.
The most important skill in secondary market position management is your ability to adjust the cryptocurrency asset position to an appropriate ratio based on market trends.
For example, during a bull market, your coins should continuously decrease, but never to zero. If they rise sharply, you can still make money. In a bear market, your coins gradually increase, but not to full capacity; even if they drop to the bottom, you can still buy at the bottom. The principle is 'having surplus.'
Take your time to practice; it requires a lot of practice. We will discuss this in detail later, but there is something to mention here.
I have always believed that going all-in is a joke for inexperienced investors, just talk, how could it really be done? However, based on years of observation, most inexperienced investors not only go all-in but even borrow money to trade cryptocurrencies with high leverage. A slight fluctuation can lead to total loss, with mild cases resulting in a debt crisis and severe cases resulting in family ruin.
This matter is quite strange; I have personally experienced it. When I first started trading cryptocurrencies, I really went all-in. After losing for a few years, I learned to diversify my purchases. Fortunately, I have never touched leverage, but what’s impressive is that I suddenly found that at least half of the people around me trading cryptocurrencies play with leverage, and half of that half will eventually play with leverage and lose a few times before stopping.
I am really a bit confused; you should know that leverage has high personal requirements. Where do these people get the courage to engage in it?
After experiencing countless tragic stories, I want to lament that not understanding position management is very close to a hellish situation.
Additionally, it is not just about trading cryptocurrencies. When you gradually master other methods, you also need to allocate other positions, such as consistently participating in new projects and arbitrage opportunities. This is a later topic you will have to face.
Three, sector asset position management
Buying coins is not something you can do with any coin at random.
Most cryptocurrency traders enter the market starting with Bitcoin, and they only dare to buy Bitcoin. They are lucky because Bitcoin is equivalent to an index fund in the cryptocurrency market, relatively stable.
However, some people are quite unfortunate. They may have entered the cryptocurrency market because of a Ponzi scheme coin, and all their assets are in that Ponzi scheme coin. No matter how well they performed on the previous two points, if the project collapses, everything is gone.
Reasonable sector asset position management requires you to allocate mainstream coins, leading sector coins, and hot concept coins according to appropriate proportions. A ratio of 532 is already quite good. However, in reality, very few inexperienced investors have such a configuration; they hold a bunch of random coins, buying whatever is popular, and after buying, they frequently change positions, often losing their direction, resulting in wasted efforts.
When it comes to sector asset management, the difficulty level increases significantly, and the benefits of being able to do it correspondingly increase. You need to have at least a basic understanding of some cryptocurrency varieties.
From my observations, there often occurs a situation where a novice comes to learn the secrets of wealth but has no idea what this coin is for, what position it occupies in the entire cryptocurrency landscape, whether it is a new coin or an old coin, and what the relationships between several coins are.
This leads to a high possibility that he has selected a few coins that have not risen, or even fallen, while watching others’ coins keep rising, feeling anxious, and after changing positions, his previous coins rise again, repeatedly fidgeting and unable to profit.
What you should understand, you must understand; what you should learn, you must learn. At least take a look at what this coin is about, what sector it belongs to, and what concept it represents.
