Position Management

Do you find that every time you go long, the price drops, and every time you go short, it explodes?

Do you always go all-in and have a mental breakdown?

Maybe what you're lacking is not technique, but position management!

Today, I will share 4 super practical position management methods for contracts in the cryptocurrency world, especially suitable for beginners and investors with unstable mindsets. Remember to like ❤️ and save ⭐ to read slowly!

Fixed Ratio Method - A must-learn for beginners

Core Logic: Divide the margin into a fixed ratio, never go all-in, and always have backup funds to add to your position or reverse.

For example, the “Half Position Rule”: open a position with only half of the margin, leaving half to cope with sudden fluctuations.

Example: If the account has 10,000 USDT, the maximum you can use to open a position is 5,000 USDT, so if the price drops, you have funds to add, and you won’t go to zero if it explodes.

Pyramid Position Addition Method - A tool for trending markets

Core Logic: Only add to your position when you are profitable, and the amount added decreases progressively, like a pyramid with a “big base and small top.”

Correct Method: Open the first position at 50%, add 30% when the price rises by 10%, and then add 20% when it rises another 10%, ensuring that the cost is always lower than the market price.

Strictly prohibited: Inverted Pyramid - starting with a small position to test, and if you lose, increasing the position size - this is the main reason for retail investors' liquidation!

Martingale Strategy (Use with caution!) - High risk, high reward

Core Logic: Double the position size after each loss; as long as you break even once, you can recover all losses.

Note: The Martingale strategy is very prone to liquidation in a one-sided market! It is only suitable for a fluctuating market and must include a stop-loss.

Improved Plan: Limit the maximum number of consecutive position openings, for example, double at most 5 times, and set a total stop-loss line.

Kelly Criterion - Scientific calculation of position size

Core Logic: Scientifically calculate the best position size for each trade based on win rate and odds to achieve long-term compounding.

Formula: f = (bp - q) / b

(f: position ratio, b: odds, p: win rate, q=1-p: loss rate)

Example: Win rate of 60%, odds of 1.5:1, then f=(1.5*0.6-0.4)/1.5=33.3% - the maximum position size for this trade is 33%.

Essential risk control principles for cryptocurrency contracts:

1. Single loss should not exceed 2% of total capital

2. Never go full leverage - leverage is a double-edged sword; used well, it can yield huge profits, but used poorly, it can lead to total loss

3. Always set a stop-loss! Always set a stop-loss! Always set a stop-loss!

4. Withdraw profits regularly - only the money moved to your wallet is real profit

Summary:

Position management is the bulletproof vest of a trader 🗿

In the cryptocurrency world, surviving is more important than how much you earn!

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