Let me tell you a story. When I suffered the most, I had a contract liquidation of 800w in 3 days, drowning in debt, almost losing my family and my life. But the cryptocurrency world is so magical. By chance, I received guidance from a master, and on a stormy night, I understood the true way to start over and become a full-time trader, a professional cryptocurrency trader, diligently studying technology, spending thousands of days and nights researching and learning!
The reason I initially suffered an 800w liquidation was due to poor position management. Therefore, I hope everyone learns to manage their positions to reduce the risk of liquidation.
What is position management?
Position management refers to a specific plan set when you decide to trade cryptocurrencies, regarding opening positions, increasing positions, decreasing positions, and how to liquidate. Good position management is one of the important means to avoid risks, achieving minimum loss and maximum profit!
How should position management be done? Is there a standard? Many traders fail largely because they treat market analysis as everything in trading, as if analyzing the market alone can determine victory or defeat. In reality, market analysis is just the most basic work; what truly determines success or failure is what you do after analyzing the market, which is the issue you consider after entering the market.
Position management includes capital management and risk control. The term 'position' should not just be understood literally; it more expresses when to increase a position, how much to increase, when to decrease a position, and how much to decrease. It’s essentially a roadmap for 'entering, increasing, decreasing, and exiting'.
The six basic principles of position management:
First: Do not operate with a full position, always maintain a certain proportion of reserve funds.
Second: Buy and sell in batches to reduce risk, dilute costs, and amplify profits. The advantage of buying in batches downwards and selling in batches upwards is that your average price is lower than others, leading to higher returns.
Third: When the market is weak, hold light positions. In a bear market, it's best not to exceed half a position. In a strong market, you can take heavier positions, but in a bull market, it's suggested to limit your position to 80%, keeping 20% as short-term or reserve funds for unexpected events.
Fourth: Adjust your position accordingly as market conditions change, appropriately increase or decrease your position.
Fifth: When the market is sluggish, you can hold short-term and wait for opportunities.
Sixth: Position change: Retain strong coins while selling off weak coins.
The above six principles apply to both spot and contract trading. If you still don't understand, please read it carefully a few times; reviewing helps to reinforce knowledge.
Spot Position Management
Example: If you have 100000U, you should divide it into ten parts! Prepare to buy ten coins! Allocate 10000U for each coin! Each time you enter the market, it's the same amount of money!
Example: For XX coin, establish a position at XX price with 50% of the position, and add to the position at XX price with 50% of the position. The 50% position means allocating 10000U per coin, with 5000U for establishing the position and reserving 5000U for adding.
The biggest taboo in spot trading: Heavy positions on coins you are confident in, and light positions on those you are not!
This coin is good; I will buy a bit more, let's say 30000U. This coin is just okay; I will buy 10000U.
If you do not follow this position, a problem will occur. If you buy coins worth 30000U with a heavy position and they lose 10%, that's 3000U. If your light position coins worth 10000U gain 10%, that’s only 1000U, and you are still at a loss!
The above is the plain language operation of spot trading; if you don't understand, read it a few more times.
Contract Position Management
ETH position allocation, calculated by quantity!
With a principal of 1000u, the position cannot exceed 5
With a principal of 3000u, the position cannot exceed 10
With a principal of 5000u, the position cannot exceed 20
With a principal of 10000u, the position cannot exceed 30
With a principal of 30000u, the position cannot exceed 50
With a principal of 50000u, the position cannot exceed 100
BTC position allocation, calculated by quantity!
With a principal of 1000u, the position cannot exceed 0.5
With a principal of 3000u, the position cannot exceed 1
With a principal of 5000u, the position cannot exceed 2
With a principal of 10000u, the position cannot exceed 3
With a principal of 30000u, the position cannot exceed 5
With a principal of 50000u, the position cannot exceed 10
Contracts are actually the same as spot trading; the initial capital for each order is the same, and the quantity for each order is the same. Take profit when you should, take losses when you should, and treat yourself like a trading machine! In the end, I will conquer you with strength!
