In recent trading strategies, a frequently mentioned term has emerged: rolling positions.
Many people like to refer to rolling positions as T+0 trading; it is a trading method for arbitrage in specific environments.
By competing within the day, through buying and selling at highs and lows, arbitrage can be achieved, earning a certain profit.
This method essentially uses intra-day emotional fluctuations to achieve arbitrage.
The money made comes from the chips of panic selling and the difference in buying by trend followers.
The advantage of rolling positions lies in lowering holding costs and achieving intraday arbitrage.
It may seem easy to complete high selling and low buying within a day, but the actual difficulty is considerable. Once you make the wrong move, it can lead to losses.
Rolling positions not only require high standards from traders but also need specific environments.
Many people become addicted to rolling positions and find it easy to get stuck in them and difficult to get out.
Busy trading contributes to fees, supports the brokers, and starves oneself, giving back to the market for no reason.
Rolling positions definitely require specific environments.
1. The market is experiencing significant fluctuations.
I rarely roll positions when the market fluctuation is very narrow; it has no meaning. Busy earning a meager amount, wasting energy, and easily making mistakes.
If the intra-day fluctuation is only 1-2% and the index fluctuation is below 1%, there is no need to roll positions at all.
Currently, the index experiences significant daily fluctuations, which is why there is room for rolling positions.
This is a requirement of the broader environment; it can certainly be visualized to individual stocks, but the broader environment is definitely the core.
2. For unilateral downward trends, do not roll positions.
Because in a downtrend, there are only lower prices, never the lowest; rolling positions only increases losses.
When making rolling positions during adjustments, you must sell first and then buy; however, this reverse rolling method is very difficult.
Because retail investors fear missing out even more than being trapped.
The result is a downward trend; the extent of losses not only does not decrease but will increase significantly.
3. The volatility of individual stocks should be at least 5%.
If it is below 5%, do not consider rolling positions; it is mostly futile, and highs and lows are difficult to grasp.
Therefore, the individual stocks targeted for rolling positions must be highly elastic.
In the market, stocks with high recognition and those that attract significant attention from funds are the best targets for rolling positions.
Position allocation for rolling positions.
Position allocation is also one of the cores.
Usually it is a 2:1 ratio, with a base position of 2 and a rolling position of 1, suitable for most investors.
There can also be a 1:1 ratio, with the base and rolling positions being equal; this way, you can earn more, but it’s only suitable for trading experts.
Ordinary people must remember not to engage in large-scale rolling positions due to greed.
Gains and losses share the same source; once you make a wrong move, the extent and proportion of losses will not be small.
The core of rolling positions.
Rolling positions are based on the judgment of the overall market environment, followed by individual stocks.
Those who roll positions without considering the overall trend are often just rolling randomly.
If you cannot judge the direction and trend of the index, do not easily roll positions on individual stocks.
Unless you have tracked for a long time and understand the main force's behavior, otherwise, it is just pure gambling.
The essence of rolling positions is to arbitrage by exploiting the greed and fear of the opponents in trading.
When stocks fall rapidly, retail investors panic and sell, and once they start to rise again, they will follow suit desperately.
This low and high fluctuation is the core of rolling positions.
Selection of targets for rolling positions.
The targets for rolling positions do not have to be strong stocks, but they must be stocks with significant volatility.
In the case of unilateral downward fluctuations without panic selling, do not blindly roll positions; the failure probability is high.
Try to choose stocks with excellent fundamentals that are in an upward trend.
You can also choose leading stocks in certain themes during the adjustment phase to roll positions.
You must understand how to find emotional lows during trading.
From the index perspective, there are generally 2-3 emotional lows, so it is not appropriate to roll positions as soon as the market drops; don't rush.
At least there should be a certain amplitude; this amplitude is difficult to understand and requires more practical experience.
For example, for stocks priced at 20cm, at least -5% or even -8%, -10%; for stocks at 10cm, at least -3%.
This decline cannot merely be a drop in individual stock sentiment; it must be superimposed with index sentiment.
Because the index's decline has limited space, sentiment can easily recover, which reflects on individual stocks, and some funds will actively buy to restore balance.
For example, if a stock plunges sharply and market sentiment is poor, it will head straight for the daily limit down.
If market sentiment is good, it will rise with the trend, and there may even be a reversal.
Regarding the arbitrage of rolling positions, this amplitude typically targets half of the volatility.
Do not get attached to what is called the ceiling limit; this is not something ordinary small investors can do.
If you have 5%-10%, be content; if 20cm has 10-15%, be content; otherwise, it's easy to end up losing more than you gain.
The significance of rolling positions lies in accumulating small gains through fluctuations, rather than large-scale arbitrage.
Regarding the success rate of rolling positions.
It is definitely not 100%. Aim to achieve a success rate of over 50%, a 30% break-even rate, and a failure rate below 20%, preferably within 10%.
If the situation seems unfavorable, try to exit.
For example, if you buy at -5% in the morning and the stock price rises to -3%, then turns back down.
So, when it appears again at -5%, just close the position and exit, losing at most a small fee.
There is also a core principle to rolling positions: it's better to miss out than to make a mistake.
That is, don't blindly roll positions, and don't chase highs to roll; that is completely counterproductive.
Many people do not understand rolling positions and blindly follow the trend of rolling.
The outcome is destined to be deeper and deeper.
Certain special situations.
1. For stocks hitting the upper limit, when the orders are quickly reduced, you can follow and sell.
2. For stocks hitting the daily limit down, when the orders are quickly reduced, you can follow and buy.
Arbitrage in special situations is not suitable for ordinary investors and does not happen frequently.
For this part, do not place too heavy a focus; it is not a core item.
The core of the market is always making money through the big trend.
Arbitrage through consecutive limits under capital premiums.
Arbitrage through rolling positions under severe fluctuations.
These two types of arbitrage are both methods of arbitrage in specific environments.
Once the market environment changes, do not engage in random arbitrage; it is easy to get trapped.
Therefore, the position for arbitrage should be kept at 20-30% of the total position.
The base position (50%) is always based on selecting quality stocks with a big trend.
The vast majority of people make money through trends, and trading arbitrage is just a bonus in specific environments.
In the end, there are two types of people who are not suitable for arbitrage.
The first type is those who don't have time to watch the market.
These types of people are not suitable for arbitrage, nor even for short-term trading.
The second type is those who cannot withstand trading risks and like to chase highs and cut losses.
Investors controlled by emotions increasingly lose money, and the speed of loss will accelerate.
Arbitrage is making money through pure gaming; the essence of zero-sum gaming is time and emotion.
So first, think clearly about whether this trading method suits you before considering trying it.
Never lose both your wife and soldiers.
The above are some of my personal views and insights. If you find them helpful, feel free to like and save them. I am Xiaoyaozi, someone who has experienced three cycles of bull and bear markets, adept at logical stock selection and technical timing, trading only within the scope of my understanding, and every direction has been validated by the market!
Success is not accidental; opportunities are also reserved for those who are prepared. Follow (Crypto Xiaoxun), a helmsman skilled in combining short and medium-term wave arbitrage. In the future stock market journey, regardless of the situation, I will accompany you all the way. $ETH $BTC
