[Over-positioning: Traders’ “suicidal operations” and how to solve them]

Over-positioning is one of the most deadly traps in trading. It may seem to dilute the cost, but in fact it may make the account go to zero in an instant. Combining the market's blood and tears lessons with professional strategies, the following are the key points:

1. Three fatal dangers of over-positioning

​Non-linear loss: loss accelerates and eats up the principal​
Blindly adding positions will exponentially amplify the risk. For example, if you double your purchases every 10% drop, the loss will be as high as 76% when the price is halved. This "loss acceleration" is particularly fatal in a bear market or leveraged trading - for example, when crude oil plummeted in 2022, traders started "bottom-fishing" at $90, and when the oil price fell to $70, their positions were liquidated due to excessive leverage.

Data model: Invest 10% of the funds in the first warehouse, and the proportion of each subsequent increase will decrease, and the loss can be reduced to less than 30%.

​Emotions out of control: rationality is kidnapped by positions​

Overweight positions will trigger the psychological "sunk cost effect". Traders continue to increase their positions because they are unwilling to lose money, and eventually become slaves to emotions. For example, if a stock falls from 10 yuan to 6 yuan, the first loss is 20%. If you blindly increase your position to full, the total loss will surge to 33%. At this time, traders often sell their stocks in panic or wait for a "miracle rebound" in luck, resulting in greater losses.

​Liquidity Trap: No Way to Escape When the Market Turns Around​

Over-positioning may exhaust account funds, making it impossible to cope with unexpected risks. For example, ETH whales were forced to close their positions due to insufficient margin when the price continued to bottom out due to heavy leverage contracts. Market liquidity changes rapidly, and full positions may be liquidated due to lack of funds to cover positions or inability to stop losses in time.
2. Cracking strategy: the transformation from "gambler" to "sniper"

​Pyramid method of increasing positions: using discipline to fight greed​​First position test: only invest 10%-20% of the funds, and set the stop loss to 3%-5% of the entry price.

​Trend verification​: When the price breaks through the key resistance level and the trading volume increases, increase the position in proportion (e.g. 20% for the first position and 15% for the second position).
​Dynamic stop profit: Profit targets are set in stages (such as 15%-20% annualized) to avoid missing the opportunity to exit due to greed.

​Risk exposure control: positions are linked to volatility. High volatility market: the upper limit of the position is controlled at 20%-40% to avoid extreme fluctuations caused by one-sided market conditions.
​Low volatility market​: It can be appropriately increased to 50%-70%, but it needs to be combined with stop loss and hedging strategies.
Example: For a $100,000 account, if the upper limit of risk tolerance for a single transaction is 5%, the maximum loss must be controlled within $5,000.

​Psychological firewall: Replace intuition with rules​​Forced cooling-off period​: Suspend trading for at least 24 hours after a big loss to avoid emotional operations.
​Trading log review: record your trading motivations every day and identify dangerous signals such as "opening a position out of boredom" and "revengeful position increase".
​Sleep quality monitoring​: If holding positions causes insomnia, immediately reduce positions to your psychological comfort zone.

3. Lessons learned from blood: What those cases of liquidation taught us

​Crude Oil Futures Tragedy (2022)
Traders started to buy at $90, and doubled their long positions every $5 drop. When the oil price fell to $70, their positions were liquidated due to leverage. Lesson: Before the trend reverses, any "cost dilution" is self-deception.

ETH Whale Liquidation (2025)
A large investor held a large leveraged long position. When ETH continued to fall, his position was forced to close due to insufficient margin, resulting in a loss of more than 10 million US dollars in a single day. Lesson: Leverage is a double-edged sword, and position management is more important than predicting the rise and fall.
​Retail investors follow the trend and are wiped out (the peak of the bull market in 2024)
Hot stocks were hyped to high prices, and retail investors collectively filled their positions to chase the rise. When the bear market came, their assets shrank by 80%. Lesson: When the market is in a frenzy, it is often the peak of risk accumulation.
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The essence of over-positioning is "covering strategic laziness with tactical diligence". A true trading expert is not a "prophet" who predicts the market, but a "survival expert" who manages risks. Remember: the market never lacks opportunities, but lacks the capital to survive until the opportunity comes.

#TradingTaboo#TokenPsychology#ZenMuskCheats
Some friends said that I was a pessimistic trader, and I was also drunk.
I can only say you are right!
Pu Ge said this one night.
Don't take yourself too seriously, but take your positions seriously.

👉

Forward reminder: It is better to earn less than to have your position liquidated!