Freeing oneself from being trapped means using various methods to turn losses into profits or reduce losses to a minimum after being trapped. The essence of freeing oneself from being trapped can be summarized as averaging costs; once the cost is below zero, it is considered a successful release from being trapped.
Secret Point 1: Price Difference [High Sell, Low Buy]
The price difference method, commonly known as 'high sell and low buy', is also a very easy operational method for freeing oneself from being trapped. When the market is in a range-bound oscillation, sell trapped long positions at relatively high prices, and buy again when the market falls to relatively low prices, waiting to sell again at high prices, thus earning the intermediate difference to achieve the purpose of averaging costs.
Risk: The risk of the price difference method is relatively small. As long as one relies on the upper and lower limits of the oscillation range, operations can be carried out smoothly. However, if the oscillation range turns into a bottom, one faces the risk of missing out when selling at the upper limit. If the oscillation range turns into a downward continuation, there is a risk of being trapped again when buying at the lower limit.
Secret Point 2: Adding Positions at a Low Price
This is the most widely used and simplest method for freeing oneself from being trapped. When investors are trapped at a high position, they choose to hold their positions and then add positions at a low price, hoping to free themselves through the market's rebound or reversal. When the market rebounds, the losses from high-position long positions gradually decrease, and the profits from low-position long positions gradually increase. Thus, even if the market does not return to its original height, investors can relatively easily achieve a release from being trapped; if the market develops well, there may also be opportunities for profit.
Secret Point 3: Reducing Positions at High Prices
Reducing positions at high prices, as the name suggests, advises trapped investors to cut positions early, but the premise is that the investor has confirmed that their market judgment is incorrect. The process is to decisively close positions at high points during a rebound. This is a last resort in the strategy of freeing oneself from being trapped, taken as a 'running away' tactic when release seems hopeless.
Cutting positions is not without strategy. Reducing positions at high prices can basically be divided into two phases. The first phase is 'at a high price', meaning that even though the main trend contradicts the original judgment, one must wait for a rebound that aligns with their interests before taking action to cut positions; the second phase is 'reducing positions'. Here, it is called 'reducing positions' rather than 'cutting positions' because it should not be done abruptly, throwing all trapped short positions at once, but should be done step by step and with a plan to gradually alleviate pressure. First, investors should analyze the stage of their trapped short positions, confirming the development trend of the trapped currency.
If investors believe that the trapped currency is currently at a high trend position and is likely to reverse, then investors should make a decisive decision to heavily close their positions when the market shows slight improvement, following the principle of 'from heavy to light' for closing trapped short positions. If we divide the trapped short positions into 10 parts, taking three opportunities to short as an example, the shorting ratio is approximately 7:2:1. In short, the greater the risk, the faster you run.
If the individual is at a low trend position, meaning that although the current market does not align with the original judgment, there is a possibility of reverting to the original judgment in the short term, investors do not need to rush to exit. When the market has a local rebound, they should follow the principle of 'from light to heavy' for closing positions, with a shorting ratio of approximately 3:3:4, and can appropriately enlarge the time interval for shorting opportunities, even leaving a small amount of trapped positions to hope for small profits after the market reverses.
Risk: The difficulty in reducing positions at high prices lies in how to confirm that the market judgment is incorrect and when to make a decision. If the main trend of the market aligns with the investor's original judgment, but the current trend contradicts it, investors may miss profitable opportunities. However, if investors realize their market judgment is incorrect, they often wake up too late, resulting in certain losses.
Note: The heavier the trapped position of the investor, the sooner they should reduce their holdings at a high price; the longer they drag, the greater the loss. Those who do not understand can consult Fengchu, which fully reflects the principle that 'time is money.'
Three elements of trading:
1. Trend is king; go with the trend, and going against it leads to downfall.
2. Entering the market with a light position and gradually increasing the position can avoid losses from sudden market movements.
3. Every trade must have strict stop-loss measures; do not casually enlarge the stop-loss or fail to set a stop-loss.
Some losing investors can never forget the past. When making new trades, they always think about how to make up for previous losses, which unconsciously makes them lose the ability to calmly analyze and judge market changes. They fail to act when it's time to profit, always thinking about obtaining more profits, and the result is often more losses. It's hard to forget the past, but making a trade is easy. So start over and do each trade seriously; this might be the best way to forget the past.
