Trend trading, as the name suggests, involves buying and selling in accordance with the current trend. If the current trend is rising, buy to open a position; if the current trend is falling, sell to open a position. Although there is no issue with understanding trend trading, this is merely the surface significance of trend trading. In actual trading, it is not easy to execute because many uncertain factors are involved, including trend analysis and judgment. The same trend can have different interpretations by different traders.
Secondly, there are significant differences in choosing which level to follow the trend. Some traders prefer to follow larger level trends, while others prefer to follow smaller level trends. Moreover, trend trading also has its drawbacks. The biggest drawback of trend trading is that it can lead traders to chase highs and sell lows. Because some traders see the trend late and wait until they see it clearly, they may already be at the late stage of trend development, which leads to chasing highs and selling lows, which is also a significant hassle.
However, whether or not you agree with trend trading, it is indeed one of the most commonly used trading methods in the current speculative market, both abroad and domestically. This is because trend trading is closer to the market's side, and the market trend's development often follows a process—some processes are short, while others are long. Studying the direction of the trend means studying the current market dynamics and understanding what the market is doing. The winning probability of standing on one side of the market is generally higher, at least I can assume that the market does not frequently and suddenly change its current direction of movement, which is the inertia of trends.
How do I know when the trend will come?
Now let's see how we should follow the trend.
The first question is how to determine the trend. How to judge the trend is very important. If the trend is judged incorrectly, then trading with the trend or against it becomes meaningless. Because you do not know what the current trend is, how can you follow it?
There are many methods for judging trends, including moving average systems, Dow Theory, trend theory, etc. However, we must consistently use one method, that is, our own method of judging trends. This can achieve consistency in trend judgments. Here, I will introduce a method that combines these classic trend analysis theories.
First, we categorize the trend direction into upward, downward, and sideways, which is not problematic. Secondly, we categorize the level of trends; we generally define trends as small-level trends, short-term trends, medium-term trends, and long-term trends.
A small-level trend refers to the price's performance over a short period, typically between 1 and 3 days. Small-level trends often occur in short-term trends but in the opposite direction, which we refer to as small-level rebounds or pullbacks; however, these have little impact on the overall trend. Once a small-level trend is replaced by a new high or new low, it often serves as a good entry point, whether for opening positions or adding to positions.
Short-term trends refer to price performance over a short period, whether rising, falling, or sideways. We generally check whether the price reaches new highs or lows over periods of around 3 to 10 days. If so, we can say that the current short-term trend is upward. The same reasoning applies to short-term downward trends, but the price must reach new lows within the specified period. Ideally, the price should maintain this new high or low until the close of the day. How do we understand new highs or lows within 3 days or 10 days? A new high within 3 days means that the high of the third day is higher than any high in the previous two days, and we can call it a new high within 3 days. The same understanding applies to 10 days; a new low is the opposite. Additionally, we should also note that short-term upward and downward trends alternate.
The medium-term trend is defined by extending the time frame appropriately, generally referring to periods of about 20 to 50 days, while short-term trends refer to whether new highs or lows are established within a specified number of days. The 'days' within the short-term trend have the same meaning, meaning we treat the short-term trend as a whole (that is, one day within the short-term trend) and then check whether the current price has established a new high to judge whether the current price is in a medium-term upward trend.
In addition to this method for judging trend levels, we can also verify the accuracy of current trend judgments based on trend lines. Short-term trends use short-term trend lines, connecting the price lows in succession to see if they form a straight line. Medium-term trends connect the lows of short-term trends to see if they are above this straight line. Essentially, the main function of trend lines is to assess the strength of trend development.
Medium-term trends consist of short-term upward trends and short-term downward trends. Long-term trends are composed of medium-term upward trends and short or medium-term downward trends. Meanwhile, the development of trends also involves issues of strength and weakness.
The strength of the trend can be assessed by both the slope of the trend line—steeper upward lines generally indicate stronger uptrends—and the daily line combinations, where strong upward trends typically show consecutive bullish lines. Finally, whether there is a strong trend accompanying the rise, etc.
If a trend starts strong, it is likely to remain strong afterward. This trend strength relationship is also quite important for selecting entry points.
Once the trend is judged correctly, some problems can be easily resolved.
Trend trading, which trend should we follow?
In trend trading, which trend should we follow? First, I think we should follow the trend with a larger level, secondly, the trend with greater strength. In a medium-term uptrend, it is best not to rush to short; in a medium-term downtrend, one should not rush to go long, and in a medium-term sideways trend, one should not trade too much. So how should we follow the short-term trend?
Although many traders buy during the adjustment phase of an upward trend, this aligns with the larger-level trend but contradicts the short-term trend. Even though this operation has a large profit potential, buying during an adjustment must not be done too early; otherwise, you may find yourself exiting before the upward trend even arrives, leading to stop-loss or liquidation. Therefore, I believe it is best to follow the short-term trend as well.
Following short-term trends can place you in a more flexible position, but as with any trend, there is a problem: the buying point may be too high in the short term, or the price may adjust slightly after buying. To avoid this problem, we can buy at the initial stage of the short-term trend. This can provide a profit guarantee for future purchases; how so? If you have some profit in the first position, a slight loss in the subsequent second position will not cause too much psychological burden, providing stability through the short-term adjustment. Once the price strengthens again, you are already in profit and can handle the price fluctuations with ease.
Holding profitable positions is always more reassuring than holding losing positions, which is a normal psychological response. Some traders feel reassured holding losing positions, which is an unhealthy mindset. In other words, if you start with a profitable position, your chance of capturing the big market movement increases.
Therefore, this involves the optimal entry point. Because at this time, the profit-risk ratio is ideal.
Here are some relatively ideal entry points, or the best entry points.
Where are the ideal entry points?
Breakthrough at key points and the initial stage of a short-term upward trend.
There are many situations for breakthroughs at key points. One is an important resistance area, which generally refers to previous highs, significant round numbers, and phase new highs. The beginning stage of a short-term upward trend often refers to specific short-term upward trends, such as short-term upward trends after breaking through horizontal trends or short-term upward trends after medium-term upward trend adjustments.
I do not want to elaborate on a specific method, as understanding my thought process should suffice for you.
In trend trading, the most needed mentality is to patiently wait. Although I provide many trading opportunities, they do not occur frequently. So before trading opportunities arise, one can only wait patiently. Fewer mistakes can lead to more successes, and this is entirely proportional. Which is better: catching a large market movement in 3 trades or in 10 trades?
Lack of patience often leads to premature intervention. When you intervene too early, you must endure market fluctuations because the upward movement may not be fully underway or may still be in a downward trend, and you often cannot hold on or your stop-loss plan will not allow you to persist. Eagerly wanting to make a quick profit often leads us to lose patience, rushing to intervene in the market too early.
Too much of a good thing is not good. The opposite of being too early is being too late. Some traders insist on seeing the trend very clearly before entering; if the market develops to a point where everyone can see it clearly, this often indicates that the trend is starting to weaken, adjust, or even reverse. Therefore, entering too early or too late is not an ideal time to enter. Everyone must have experienced many such examples; think about where your problem lies.
Whenever a market begins its initial development, many traders attempt to find reasons, and a considerable number of them believe they will not easily intervene without finding a justification for the rise. However, they may not understand that the dissemination of information takes time, or that the interpretation of information also requires time. Everyone can understand that information dissemination takes time; some news may take time to reach you. What is information interpretation? For a certain piece of information, you may consider it unimportant, but the market believes it is significant. However, this significance is gradually explained, and by the time you understand it, the market may have developed significantly already.
The legendary trading master Jesse Livermore clearly stated in the early pages of (Reminiscences of a Stock Operator), "Reasons can wait, but you must act immediately, or you will be left behind." This is the message I want to convey to you. Since it is trend trading, we should follow the trend, without overthinking. Sometimes I also frequently look at some fundamental analysis reports, which are very detailed, but after reading them, you might hesitate to trade.
I cannot comment too much on fundamental traders or other special traders; after all, as long as they can be proven effective by the market, they must be effective.
Risk control and capital management.
I must emphasize that risk control and management must be part of every trade; this warning must be deeply etched in your mind. Because I have suffered from it, a period of time may go well, but then one poorly managed trade can lead to chaos.
After determining the maximum allowable loss of total capital, it does not mean you can buy freely; currently, you still cannot, as I have clearly stated earlier.
At this point, we can calculate the maximum number of lots we can buy.
Number of lots to buy = (Capital * Maximum loss ratio) / (Value per lot * Maximum stop-loss amplitude)
Holding position size = (Number of lots * Margin per lot) / Capital.
Let’s look at a few examples. Capital is 50,000. The stipulated margin ratio is 10%, with a maximum loss per transaction at 3% of total capital, and the maximum stop-loss amplitude after buying is 2%. The current price is 30,000 per lot.
Number of lots that can be bought = (50,000 * 3%) / (30,000 * 2%) = 2.5 lots. In actual trading, you can buy 2 lots or 3 lots, but buying 4 lots would not be appropriate.
Position = 3 lots * 0.3 million / 500,000 = 18%. That means your first purchase is 3 lots, with a position size of 18%. This makes it very clear.
If you change the maximum price volatility stop-loss amplitude and the maximum total capital loss amplitude, you can also derive an answer. Are you interested in calculating it yourself?
After opening a position, you then face the issue of adding positions, which we will discuss in the next section.
How to stop-loss?
Now we need to discuss how to derive the maximum price stop-loss. That is, how to stop-loss after opening a position. How to stop-loss? This is not just a problem to face after opening a position but rather before opening a position. After opening a position, what we need to do is to move the stop-loss in a higher price direction. Remember, never move it in the lower price direction unless you are shorting. Next, when the stop-loss price is reached, sell decisively. Selling is victory; do not think about anything else; if you think too much, you will hesitate.
Let’s first discuss initial stop-loss. Stop-loss is to protect your capital. When the price fluctuation exceeds your expected normal retracement, you should sell the unfavorable positions you hold to achieve your protective goal.
In the American movie (Million Dollar Baby), the coach often tells the boxer to protect yourself. No matter what, only if you are not harmed do you have a chance; however, the ending of the movie is tragic. I do not wish to recall that last scene.
The daily volatility of cryptocurrency contract prices is still quite large. Even if the price rises on a certain day, it may decline during the day. If the stop-loss amplitude is too small, you may face frequent stop-loss issues, which can harm your psychology and lead to significant cumulative losses. Therefore, the stop-loss amplitude should be at a relatively appropriate level. Of course, if you can determine that the current price movement is already unfavorable to you, then you can exit early; you should do so.
We generally use the 10-day average volatility to measure the daily reasonable volatility of prices. Once it exceeds a certain multiple of this value, it indicates that the price is no longer within reasonable fluctuations but may undergo a directional shift. This is when we determine our final price stop-loss position.
This multiplier is set at 2 times, meaning that when it exceeds twice the 10-day average volatility, it should be our last chance to exit. If we do not exit, the consequences could be dire. Of course, you can adjust this multiplier; if you can accept multiple small losses to seize a larger opportunity, then you can do so. If you increase this number because you do not want to try multiple times to catch one opportunity, then that is indeed wise. This depends on your own methods, but in any case, you cannot afford to incur significant losses to capture one opportunity; nor can you immediately stop-loss at the slightest movement. These are two extremes. This number of 2 times is relatively moderate. Ultimately, you decide.
This stop-loss method, also known as volatility stop-loss, is one of the more commonly used and particularly effective stop-loss methods, and I recommend that all traders learn this stop-loss method.
There are also two stop-loss methods that will be used in conjunction with volatility stop-loss, which are trend-based stop-loss and time-based stop-loss.
Trend stop-loss is generally conducted according to the trend on which you based your initial purchase. When the trend no longer develops as you ideally hoped, you should consider stopping the loss. However, I still believe if there are no extraordinary circumstances, using volatility stop-loss is preferable; after all, it is better to operate less than more.
Time stop-loss. When the price performs poorly over a period, this method can be used for stop-loss operations. When a position cannot quickly move in your intended direction, it often indicates it will not continue in this direction. This is one basis for time stop-loss. Another issue is the position cost; you cannot always hold a losing position, right? If your operation is correct, you will quickly detach from cost controls.
Generally, the time frame we use is one to two weeks, meaning that if the price does not change much or perform unsatisfactorily within two weeks, we should execute a stop-loss. How much is considered satisfactory? This is defined according to personal habits and initial expectations when purchasing. Of course, this definition should align with objective reality. You cannot say you are furious because your capital didn’t double within a week.
The problem with stop-loss is that it can be troublesome when the price suddenly jumps over the originally planned stop-loss point during trading hours or at the opening. What should you do at this point? This is indeed a difficult situation, and I have also struggled with what methods to use to deal with it.
After searching for answers, I found that this method is still the most useful. It is to stop-loss as long as the price reaches your stop-loss price, even if it drops, you should stop-loss in time. Unless the price is rapidly rising and breaking through your planned stop-loss price, once it stops rising, you should stop-loss (this is for going long).
After the stop-loss, it is not the end of the matter; a very crucial task lies ahead: re-entering the market. Many traders miss many market movements simply because they do not want to operate immediately after a stop-loss. This is a great pity. I have repeatedly emphasized that capturing a large market movement cannot be achieved in just one or two attempts; sometimes, many attempts are necessary. Therefore, do not feel disheartened or frustrated by a few failures unless you made mistakes.
Before re-entering the market, we first need to adjust our mindset. After all, the loss from a stop-loss brings about a financial loss, which is generally difficult to be happy about, so adjusting the mindset must be completed in a very short time.
First, review whether the reason for the stop-loss in this operation is subjective or objective. If it is due to subjective reasons, then you should reflect on it and hope to avoid similar mistakes in future operations. If it is due to objective reasons, then it is not a big issue, as seizing a significant opportunity at once is unlikely; a few small stop-losses do not affect the overall situation.
Ultimately, re-entering the market means not letting previous loss trades affect your subsequent work; how to do it remains a question.
The timing for re-entering the market generally remains based on the previously mentioned entry timings; there is no special change.
Rolling positions after making a profit, the opportunity to make big money has arrived!
We enter this market to make big money, which is indisputable and should not be taboo. Moreover, in futures trading, the hallmark of success is whether you have accumulated enough wealth. This is the fundamental purpose of our entry into the market, at least for me. However, many traders, especially newcomers, generally believe that making money in futures trading relies solely on gambling. How can you make big money with such strict risk management? Each time you open a position with more than 20%, when will you make a profit?
In fact, these are all extremely erroneous concepts and awareness. We can only win big money by relying on reasonable trading methods and strategies; gambling leads to losses. Making money is also a loss. I think I have at least mentioned this point no less than ten times.
Continuously adding positions after making a profit is the key operation to make big money.
Absolutely never add positions to losing trades, not even one lot; it is absolutely not permissible. The legendary trading master Jesse Livermore has repeatedly emphasized that adding positions to losing trades is inappropriate, even wrong. You should add positions to profitable trades. Because once a loss occurs, it indicates something is wrong; if you add positions again, it is just compounding the error. I still sometimes make such foolish moves, and in the end, the situation often develops to an unmanageable point. Thus, many things can only be understood after suffering enough pain. Do you want to try it yourself?
It is wise to add positions only after the first position shows a certain profit. Because if the first position is profitable, it indicates that the price is moving in your favor, suggesting that your current operation is correct, at least for now. Therefore, you can start to add positions based on the actual situation. If the price subsequently moves unfavorably, you can safely exit under the protection of the profit from the first position. If the price continues to move favorably, you can achieve significantly greater profits.
Thus, adding positions after making a profit is indeed a wise operation for obtaining larger returns. Of course, when adding positions, consider whether the price movement will continue to favor you. If so, decisively add positions to obtain greater profits.
After making a profit, how much profit is enough to add positions? Generally, this profit is required to exceed the maximum volatility stop-loss amplitude.
For example, if your maximum volatility stop-loss amplitude is 2%, then your profit must also reach more than 2% to add positions. We first represent the maximum volatility stop-loss using R. Personally, I think adding positions within the range of 1.5R to 2R is appropriate.
Let’s look at an example:
Suppose the total capital is 50,000, and we buy 1 lot at a price of 1,000, with a position size of 20% and a stop-loss of 2%, meaning 980. R is 2%. If I add positions at 3%, at 1.5R, that is, at the price of 1,030, adding 15%, and the stop-loss is still R, which is 2%, the corresponding price is 1,009. (Margin ratio is 10%)
If the second trade incurs a stop-loss, the total profit and loss situation would be 50,000 * 20% * 10 * 0.9% + 50,000 * 15% * 10 * (-2%) = -600 yuan. This magnitude is still quite small. Once certain profits are obtained, the risk becomes relatively small. If you add positions based on 2R, it is very likely that the second stop-loss will not lead to an overall capital loss, and you might even make a profit. Moreover, the stop-loss range after adding positions is generally smaller than one R.
If there are good profit opportunities, of course, you shouldn't let yourself buy too little but should hold a sufficient number of positions. However, increasing positions should not be done hastily; instead, it should be done gradually based on profits while prioritizing the importance of risk control.
The stop-loss for added positions is often smaller than that of the first position, generally about 1/4 smaller. Because when adding, it is already clear that the trend will further develop, so tighter stop-losses should be used. This means reducing the stop-loss range. Using R, it would be between 0.5R to 0.8R.
Tight stop-loss uses smaller stop-losses to try to capture larger opportunities. However, this may require multiple operations to capture larger opportunities.
Of course, you can also combine the additional positions with the previous positions and calculate the total position and cost. Generally, at this time, you can use the protective cost method for stop-loss exit. That is, when the total capital begins to show a loss, you should close the position. If the total profit after adding positions is not small, you should use the profit retracement method to exit.
Finally, the issue of adding position size. Uniform adding does not pose much of a problem and is generally acceptable. Pyramid adding needs to be studied; I can tell you that I reduce my position size by 20%-40% each time I add. How to do this specifically is something you need to try and discover for yourself.
The most commonly used and reasonable adding method is pyramid adding. This means that the positions bought later are fewer; after all, price rises cannot continue indefinitely. As prices continue to rise, the risks also increase. Therefore, the pyramid adding method ensures that more positions are established under lower risk conditions and fewer positions at relatively higher risk positions. How do you determine if the risk is lower? Because I am using profits after adding positions, profits will significantly reduce risks. Therefore, the pyramid adding method has a certain basis and is indeed the best way to add positions. You might as well try the effects.
In addition to pyramid adding positions, there is also uniform adding positions, which means that the number of lots bought each time is the same. This method, while not as good as pyramid adding, is still usable. Especially in the early stages of market development, because in the initial phase, you may not be sure whether you can win this trade, so your position is not large. As the market unfolds, if you feel you can continue to add positions, then this uniform adding method will be a very good adding method. However, it still needs to be after making a profit. Discussing adding positions before making a profit or during losses is not advisable. If you feel your win rate is high and the opportunity is good when opening a position, then you should have a certain amount of chips when opening a position, and then use the pyramid adding method during the price rise.
How to let profits continue to develop?
"Profits always take care of themselves, while losses never end by themselves." This is a trading philosophy of the legendary trader Jesse Livermore.
When our trades show profits, it means the risks we face are decreasing. Moreover, once we have profits, our confidence and patience in holding positions increase. Patiently holding profitable positions is a very important intangible operation for obtaining considerable rewards. Although it seems that intangible operations mean not operating, it is very difficult to execute because we often have doubts, thinking of a series of unfavorable things that might happen to our positions, which can shake our confidence in holding positions and lead to premature position closures.
The question of letting profits continue to develop ultimately revolves around how to sell positions. Only by selling can the position be considered a completed transaction.
Another issue that involves letting profits continue to develop is how to patiently hold a position. Because it is about holding a position still between buying and selling.
Real market movements do not finish within a single day. Genuine market movements take time to complete their concluding phase. If we can endure this phase steadily while holding positions, we can gain more substantial profits during this market movement.
How to patiently hold positions will become increasingly important. Although this is an intangible operation, it is more challenging than tangible operations. Jesse Livermore repeatedly emphasized in his writings that making big money is not about repeated operations but about holding positions firmly. Of course, he requires you to hold profitable positions rather than losing ones. For losing positions, trading masters both domestically and abroad almost unanimously believe that you should quickly cut your losses and exit.
So how can we patiently hold positions? I believe the first problem that must be solved is recognition. We must realize that only medium to long-term operations can make big money. Only by making a large profit from one trade can we cover the small losses in the future. And multiple small losses are precisely the price paid to seize a larger volatility opportunity. Of course, how many times you need to catch a larger volatility depends on how you enter and how you stop-loss. If you can accept this viewpoint, then this has already laid the foundation for you to patiently hold positions.
Only when you have the correct or objective awareness can you care about how to do things well. Otherwise, it is merely an empty talk.
The second point is to have your own exit methods or strategies. This is the most important question in this section. Once you have a specific method, patiently holding positions means patiently waiting for the arrival of the exit point. With this exit method, we can cope with this ever-changing market. Otherwise, how can you patiently hold positions? There is a possibility that profits made initially could turn into losses later, or even lead to massive losses. Moreover, this method must be operable and broad enough to apply to all contract trades and provide a relatively specific exit point, rather than a vague exit method. For example, if the trend worsens, how do you define 'worse'? How much should you exit? This indicates that the method does not have a specific exit point, meaning it lacks operability.
Several exit methods.
After establishing a relatively systematic exit method, it is time to write a daily trading plan. The purpose of writing a trading plan is to be more confident and patient in waiting for this exit opportunity. Because sometimes only writing it down can solidify the plan; otherwise, thoughts can change often, feeling that it might be time to close the position at one moment and thinking it can wait a bit longer at another. An important point included in the trading plan is the question of when and at what price to exit. Every morning before the trading session and during the break at noon, write down the price at which you plan to exit; then, once the price reaches that planned point, close the position and settle. This completes a trade.
Writing a trading plan is a very important trading habit. We will spend some time on this later.
As for the time outside of this, it is just idle time. How to spend it? I do not know. As long as you do not interfere with your trading or trading plans.
Let’s turn the discussion back to exit methods. Common methods include profit retracement method, target profit method, trend exit method, and danger signal exit method, etc.
Let’s first look at the profit target exit method. When traders open positions, they first have a rough idea of the market, which is setting a target price. When the price reaches this level, they close the position. However, this method has many drawbacks.
First, it is the evaluation of the current price, which inherently carries the flavor of predicting market trends, making it difficult to have a relatively objective answer.
Secondly, what if the price does not reach this expected price and then reverses? What if the price continues to rise significantly after exiting? Of course, the latter question is common to all exit methods, but the first question is very difficult to resolve.
Therefore, I feel this method lacks operability. Because the answers given are not precise. What we need is a relatively precise exit point. Otherwise, it lacks operability. However, this exit method does have some usefulness; it can provide us with some warning. When the price starts to approach the pre-judged price level, we should be more vigilant, and the exit method should be handled more carefully. Oftentimes, having a warning is always better than having none.
Profit retracement exit method means exiting when profits drop from the peak to a certain ratio. Although this method is somewhat clumsy, it is a relatively operationally viable exit method because it provides a specific exit point, which is what we need.
Now let’s look at the specific usage of this method. Profit retracement should correspond to the respective maximum profit and the respective retracement amplitude. Based on my personal experience and views, these data are as follows:
(Profit refers to the ratio of each profit to each operation's capital.)
Profit retracement amplitude.
Within 20% 50% or more
20%-50% around 40%
50%-100% around 30%
More than 100% around 20%
Let’s provide a few examples. For instance, if my highest profit is 55%, then I can use a 33% profit retracement method to exit. In other words, when my profit decreases by 1/3, I will exit and close the position. If my profit is only 10%, then I can exit when approaching the cost. At this point, just breaking even completes the task.
I hope everyone can master this method. In such a noisy market, this method is indeed a way to make things easier.
One point that needs to be emphasized is that if you are confident in your positions, you can allow for a larger retracement; conversely, you can allow for a smaller retracement. Secondly, if your position is relatively large, you can allow for a smaller profit retracement because it inherently carries a certain level of risk; at least the risk of a lighter position is high; conversely, you can allow for a larger margin. This can also be adjusted according to your operations. Note that it should be an appropriate adjustment.
However, if the profit retracement method can be combined with the following exit methods, the effect will be even more pronounced.
Danger signal exit method, which is emphasized in Jesse Livermore's book (How to Trade in Stocks). This means that when the price shows a significant fluctuation in the opposite direction on a certain day, especially at the end of the trading day. If traders often notice such danger signals and can avoid them in time, they should see significant returns in the long run. Because once a danger signal appears, it indicates that the market may be undergoing a qualitative change. It suggests that the market is not just undergoing minor adjustments; at this time, we should take action. In any case, it's wise to exit first, as it means you have avoided danger. If the danger has passed, you can enter the market again at any time.
When a danger signal appears, at least you should exit partially or completely.
Trend exit method. When the current trend weakens, adjusts, or even reverses, you can execute position closure operations.
Trend weakening, for example, the original upward trend trajectory is still relatively clear, but as prices rise, the price trajectory shows a downward or flat trend. This means the upward trend line is shifting downward, and I believe everyone can understand this. Although at this time, profits have not shown a significant retracement, due to technical reasons, it is worth considering reducing positions. The reduction should generally be around 50%, meaning halving the position; because at this point, there is still not too much risk.
Trend adjustments or reversals. The original short-term uptrend ends, transitioning into a short-term downtrend. However, the short-term downtrend operates relatively slowly and with little amplitude, at which point we can also consider initially reducing half of the position and then exiting through profit retracement methods.
The specific approach is as follows: first determine the exit price based on the maximum price and the profit retracement. Then, based on the trend adjustment method, exit half of the position first. Next, when the price returns to the profit retracement exit price, exit the remaining half of the position, ultimately completing the entire exit operation.
Trend reversals are often accompanied by significant volatility and continuous declines. If the price does not reach the profit retracement point, one should also exit completely to effectively control risk.
No exit method can sell at the highest point, nor can it sell at the highest point. In fact, in most cases, it may not even reach half of the market's position, yet that is still considered a successful operation.
When handling surplus income, you must take action yourself and not delegate the task to others.
The purpose of doing this is to help you deeply understand that the money you earn is real money, not just numbers on the account. This will bring you immense confidence and pride. You need to know that it is possible to make money in this market and to succeed.
However, more people are ambitious, setting their profit targets very high, possibly wanting to earn multiples of their margin in a year. In fact, they do not have such capabilities, and such opportunities may not genuinely arise.
How to re-enter the market.
The difficult problem faced after exiting is how to re-enter.
How to re-enter? First, adjusting your mindset is still essential. We must know that our purpose for exiting is not to think that the market has ended but to protect profits. Even if we initially think the market is over, whether it has ended is still determined by the market. If the market indicates that my market is only halfway through, and there is more to come, then we should return to the market without hesitation.
The entry when returning to the market should still be based on the entry signal mentioned before, but if you feel you should control risks better, then your entry signal can be set stricter.
The position when returning to the market can be slightly larger than when it was first established, generally by about 5 to 10 percentage points. However, exceeding this number significantly increases the risk, and you should be aware of the consequences. Here, I must mention the issue of changing positions.
This involves position transfer; position transfers should not be made all at once but should be done in at least two parts. After the first transfer is profitable, the next half transfer operation can be performed, and this profit margin should be at least one R.
From buying to selling should be considered as completing a full transaction.
