A must-read for unwinding!!!
Unwinding is an inevitable challenge that investors will encounter in market fluctuations. When the assets held are locked in, how to deal with and reduce losses is the key. The following are three common unwinding strategies, each with different applicable scenarios and risk management ideas:
1. The core of this method is to hold still, that is, as long as you don't sell, you won't actually lose money. The premise of choosing this strategy is that you have long-term bullish confidence in the target and have sufficient funds and psychological preparation to cope with further market fluctuations or declines.
Advantages: No need to make a selling decision immediately, you can wait for the market to pick up, reducing the psychological pressure caused by short-term fluctuations. Disadvantages: This method requires strong financial support to cope with deeper declines. At the same time, this may be a long waiting process with high opportunity costs, and funds cannot be transferred to other assets with opportunities in time.
2. Dial-up operation method
This method sells part or all of the positions by stop loss first, and then buys them back when they rebound to reduce losses or achieve partial unwinding. When operating specifically, investors need to find the right time for the rebound and re-enter the market at a low level.
Advantages: The shift operation can flexibly respond to short-term market fluctuations, and there is an opportunity to reduce costs by re-entering the market, quickly recover or unwind. Disadvantages: Investors are required to have strong technical analysis capabilities and be able to accurately judge the rebound point. If the judgment is wrong, the loss may be aggravated and the best opportunity may be missed.
3. The quick knife cuts the Gordian knot method
This strategy is suitable for short-term investors. When facing a unilateral decline, they will decisively stop losses and sell all the assets held to prevent further losses. This method aims to stop losses quickly and avoid losses from expanding.
Advantages: It effectively avoids continued losses in a unilateral market, and is more suitable for short-term investors to quickly withdraw when the market turns and maintain liquidity. Disadvantages: Once sold, if the market rebounds, you may miss the opportunity to unwind brought by the rebound. Therefore, this method is suitable for short-term speculators, but not for investors who are optimistic about the target in the long term.
