First, a summary: Rolling warehouses are high-yield operations, but they also carry extremely high risks, so be cautious. The combination of rolling warehouses (exponential growth) and compound interest model is a high cost-performance strategy. Note that rolling warehouses represent exponential growth, while compound interest is a special manifestation of exponential growth. In summary, effective utilization (unrealized profit) is the core of rolling warehouses and compound interest!
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Now let's officially start discussing rolling warehouses.
With a principal of 5000, at 10x leverage, a wave of 100% increase results in a final profit of 5 million; this is rolling the warehouse.
Adding to a floating profit position is not the same as rolling the warehouse. Because the current market definitions and methods of rolling warehouses are all directly copied and pasted from the opinions of Fatty, Bit King, and Tony, it is still not easy to understand for novices with little investment experience. This article aims to explain it in a straightforward and blunt manner.
Assuming BTC is currently priced at 10000, with a position of 5000, at 10x leverage. At this point, BTC rises to 11000, a 10% increase, and you make a profit of 5000. Ok, the next operation is very important.
1. The method of adding to a floating profit position is to add another 5000. Then BTC rises to 12000, increasing by 10%. At this point, your total investment including profits is 25,000. (The principal consists of two 5000s + three 5000s in profit)
2. The method of rolling the warehouse is to close the previous position, totaling 10,000 including principal and profit, then build a position again. Subsequently, BTC rises to 12000, with the same increase of 10%, at this point your total including profit is 20,000.
Looking at it this way, is there really no difference? But as long as you keep doing it in a loop, when BTC rises to 20000, the increase is 100%. Ultimately, the total investment including profits from adding to a floating profit position is 325,000 (including 50,000 principal). The rolling warehouse total including profits is 5,120,000 (including 5,000 principal).
Why is the difference so large? Let's analyze it together.
What is a complete position-building cycle?
Building a position → Floating profit → Floating profit → Closing the position
What is a complete floating profit adding cycle?
Building a position → Floating profit → Adding a position → Floating profit → Closing the position
What is a complete rolling warehouse cycle?
Building a position → Floating profit → Closing the position, then building a position again → Floating profit → Closing the position
OK, here are two concepts to extend, also using easy-to-understand methods. One is linear growth, which increases like 10%, 10%, 10%. The other is exponential growth, which increases like 10%, 20%, 40%, 80%. Linear growth is like driving, going smoothly from 10 to 20 to 80. Exponential growth, on the other hand, is like technological development, which grows exponentially; it starts off slow but accelerates over time. Here’s a rough example for understanding: Based on solid evidence, humans became proficient in using fire 400,000 years ago, electricity 200 years ago, cars about 100 years ago, the internet 55 years ago, and mobile internet 30 years ago. This means that after humans became proficient in using electricity, technology developed rapidly. In comparison, those previous 400,000 years seem trivial. Now, back to the main topic.
At this point, let's draw an analogy:
Ordinary position building is linear growth. Strictly speaking, contracts do not count as linear, but for the sake of analogy, this makes it easier to understand.
Adding to a floating profit position is based on linear growth with additional investment.
Rolling warehouses represent exponential growth that multiplies.
Here is a manually calculated chart for a visual overview. Each circled 5000 is the additional principal added to the floating profit position.
At this point, do you think, wow! It's that simple! Isn't this the key to wealth? But in reality, the operation of rolling warehouses has a set of strict prerequisites: capital management, profit taking and stop loss, and the most important prerequisite -- a one-sided rising bull market. The biggest risk behind such high returns is that if there is a drawdown of more than 10 points, you could lose everything. However, I personally believe that through reasonable profit-taking and stop-loss methods, it can still be controlled. If you really encounter such a major market event that happens once every four years, it can be put to use.
Summary: Behind the high returns of rolling warehouses is also extremely high risk, so caution is essential. The combination of rolling warehouses (exponential growth) and compound interest model is the most cost-effective strategy. Note that rolling warehouses represent exponential growth, while compound interest is a special manifestation of exponential growth. This means that all compound interest is exponential growth, but not all exponential growth is compound interest; spot trading is the compound interest model.
If you have just entered the market, come find me, follow me, and I will teach you how to learn while operating; if you are already in it but not doing well, you can come find me, and I will help you. I won’t let you make the same mistakes again. If your position is stuck, I will provide reasonable solutions based on your entry points. Because everyone has different entry points, the solutions will also vary; some are suitable for conservative investors, while others are for aggressive ones. I will definitely use the most suitable methods to effectively solve your problems and assist you in exiting.
