In spot trading, should you aim at one coin and take all or most of your positions (method 1), or should you evenly distribute your positions among several coins (method 2)? Which is better?
Most people will certainly think that evenly distributing positions is equivalent to diversifying risks, and method 2 is better than method 1.
In fact, the technical risk coefficients of these two operations are the same. How to understand?
1. If method 1 loses money, it is a 100% loss.
However, the profit coefficient cannot be guaranteed to be 100%. No matter how well you aim, there will be Waterloo. However, it is certain that the profit coefficient is larger and can be regarded as 80%.
2. If method 2 is profitable, if the profit coefficient is 60%, then the loss is 40%.
The technical risk coefficient is the absolute value of the profit coefficient minus the loss coefficient. After calculation, the technical risk coefficients of method 1 and method 2 are both 20%, and the answer is the same.
So what are the essential differences between methods 1 and 2?
Apart from time cost and technical aspects, mentality is the only key point that dominates the operation.
Evenly distributing positions always gives people a sense of leaving a way out, and if the east is not bright, the west will be bright. However, using most or all of the positions to go all in on one position requires a strong heart.
And mentality is often the key to controlling profits and losses.
Those with unstable and calm mentality are afraid to stop loss when the price drops a little, so the original 80% profit opportunity will instantly turn into a 100% loss. This type of retail investor is more suitable for evenly distributing positions.
And those with a stable mentality can always smile at the wind and clouds no matter how the positions are distributed.
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