财经少华
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Empty Position, Full Position, Half Position - The Second Most Important Thing in Investing
First, let me explain why it's the second most important. The first is determining your investment behavior model, and only then comes the position size.
For example, if you are trading overnight, buying and selling the next day, you can go all in and out.
For instance, if you are doing unlimited dollar-cost averaging, your subsequent cash flow determines that you will never be fully invested at any given moment.
Is it uncomfortable to have an empty position?
Even amidst the market's ups and downs, if you can't understand it and there are no opportunities that meet your criteria to pull the trigger, you must resolutely remain inactive.
This can be difficult, but most people can achieve it through market education or deliberate training. It's also relatively easy to understand.
Full Position.
If you're willing to go all in, you’re also willing to use leverage. If you're willing to use leverage, you're also willing to self-destruct.
The biggest drawback of a full position is the psychological toll. Because greed maximizes, fear also maximizes, and any slight fluctuation can leave you in extreme highs and lows.
Empty Position - Buy - Full Position - Sell - Empty Position.
In this logical chain, there’s a significant issue: all your decisions need to be 100% correct, which is a fantasy for the average person.
In fact, there’s another option: Half Position.
A half position provides a buffer for both your fear and greed, increasing the margin for error in your decision-making. This allows you to survive in the market for a longer period.
First, let me explain why it's the second most important. The first is determining your investment behavior model, and only then comes the position size.
For example, if you are trading overnight, buying and selling the next day, you can go all in and out.
For instance, if you are doing unlimited dollar-cost averaging, your subsequent cash flow determines that you will never be fully invested at any given moment.
Is it uncomfortable to have an empty position?
Even amidst the market's ups and downs, if you can't understand it and there are no opportunities that meet your criteria to pull the trigger, you must resolutely remain inactive.
This can be difficult, but most people can achieve it through market education or deliberate training. It's also relatively easy to understand.
Full Position.
If you're willing to go all in, you’re also willing to use leverage. If you're willing to use leverage, you're also willing to self-destruct.
The biggest drawback of a full position is the psychological toll. Because greed maximizes, fear also maximizes, and any slight fluctuation can leave you in extreme highs and lows.
Empty Position - Buy - Full Position - Sell - Empty Position.
In this logical chain, there’s a significant issue: all your decisions need to be 100% correct, which is a fantasy for the average person.
In fact, there’s another option: Half Position.
A half position provides a buffer for both your fear and greed, increasing the margin for error in your decision-making. This allows you to survive in the market for a longer period.
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.