In the currency circle, if you manage your positions well, you will outperform most people.
The topic shared is the management of trading positions. How you manage your positions directly determines your risk level, average position price and final profit. This can be said to be the most important point besides direction and mentality.
What is position management? Position management refers to a specific set of plans for opening, adding, reducing, and clearing positions when you decide to speculate in currencies.
Good position management is one of the important means for us to avoid risks, which can minimize losses and maximize profits!!
How should positions be managed? Is there a standard?
One of the most critical reasons for the failure of many traders is that they regard market analysis as all aspects of trading, as if they can determine victory or defeat as long as they analyze the market. In fact, the actual market situation is only the most basic work. What really determines the outcome is the work after market analysis, which is the issue you consider after entering the market. Position management includes fund management and risk control.
The word "position" should not be understood to indicate the meaning. Position is more about when to increase the position, how much to increase, and where to reduce the position and how much to decrease. That is, the road map of “entering the market, increasing the position, reducing the position, and exiting the market”.
Then the complete transaction process should be:
1. For market analysis, you can use any technical analysis.
2. For position management, after entering the market, you need to consider what may happen next, what to do if you make a profit, whether to add to the position, or to leave the market with a full stop loss, or continue to hold it. What if the profit expands again? What should you do if you lose money? Should you stop the loss, carry the order, or leave the market first? How big the loss will be before you leave the market completely. Position management considers both risk and reward factors.
3. Strictly execute transactions. When your plan is clear, start implementing it. Don't let market fluctuations disrupt your thinking.
4. Summarize the transaction. After a transaction is completed, it is necessary to review the transactions in the previous period. The samples reviewed should span the three market conditions of rise, fall and shock, and then based on this, market analysis, position management, and To improve and optimize the process of executing transactions, we must first find the entry point based on our own trading technology. This position must be a support line.
When the market is above the support line, the trend is upward; when the market falls below the support line, the trend is downward; more importantly, the support line is also the basis for us to define potential risks. When the stop loss is placed below this support line, The potential risk range is determined. If the initial stop loss area below the support line is touched, you should leave the market or close most of the positions first, and then gradually close the positions as the decline continues until all positions are closed. . Then, the potential profit margin is above the support line, and the market's upward trend has not ended, so the potential profit is theoretically unlimited. If the market goes up after entering the market, we can hold the original position to wait for the increase, or add positions incrementally based on the original position.
We will carry out trailing stops based on market developments and changes. When the market goes as we expect, we should move the stop loss closer to the cost price or below the support line with a certain range. Moving the stop loss is to continuously reduce the risk range in the market, which is equivalent to your Floating profits are locked in.
When the price rises to a new support or pressure level again and begins to fall back, then the position reduction area is below this support or pressure level. At this time, we must gradually close all positions. To summarize: First, we need to find a support pressure line for the cost price. When the price rises and is far away from the cost line, we gradually increase the position. The increase must be in a decreasing manner. When the price falls and gradually moves away from the cost line, we gradually reduce the position. The same is true for reducing the position. Decreasing. Your position management techniques must consider both risk and reward
Six basic principles of position management:
First: Do not operate with a full position and always maintain a certain proportion of reserve funds:
Second: Buy and sell in batches to reduce risks, dilute costs, and magnify returns. The advantage of buying in batches downwards and selling in batches upwards is that your average price is lower than others and your income is higher.
Third: When the market is in a weak position, you should hold a light position, and it is best not to exceed a half position in a bear market.
Fourth: As the market changes, corresponding position adjustments should be made, and positions should be increased or reduced appropriately.
Fifth: When the market is down, you can take short positions and wait for opportunities to come.
Sixth: Exchange positions: keep the strong currency and sell the weak currency.
The above 6 principles apply to contracts. If you still don’t understand it, please read it carefully several times. You can learn something new by reviewing the past, and you can become a teacher!
Next, let’s talk about the method of position management, which is to operate in batches
Batch operation refers to the act of dividing the invested funds and opening, increasing or reducing positions in batches. Batch operations can be completed within a day or over a period of time.
Why do you need to do these actions? Because the currency market is unpredictable, and rises and falls are high-probability events. No one can accurately predict short-term price fluctuations, so you must set aside enough funds to deal with unpredictable fluctuations.
If you do not have enough confidence and carry out a full position operation, once the market changes in the opposite direction, it will cause huge losses. Therefore, the risk of full warehouse investment can be reduced through batches, and costs can be diluted, which is the basis for reducing costs and amplifying returns.
Next, let’s talk about how to batch: divided into two types: equal batches and non-equal batches.
First: Equal portion allocation, also known as the rectangular buying and selling method, refers to dividing funds into several equal portions and buying or selling them in sequence. The proportion of funds for each purchase and sale is the same. Usually 3 or 4 equal parts are used. For example, buy 30% first, and then buy 30% if you start to make a profit. If you don't make a profit, no new funds will be involved for the time being. When the price of the currency reaches a certain high point or the market changes, the positions will be reduced and sold in batches.
Second: non-equal allocation, which refers to the different proportions of funds, buying or selling, such as 1:3:5, 1:2:3:4, 3:2:3, etc. The shapes produced according to the proportion are divided into: rhombus, rectangle, hourglass shape, etc. The pyramid trading method is commonly used.
Third: Same funds, same positions, comparison using different methods.
Pyramid: 1,000 for 5 floors, 1,100 for 3 floors, 1,200 for 1 floor, average price 1,055
Inverted pyramid: 1,000 buys 1 floor, 1,100 buys 3 floors, 1,200 buys 5 floors, the average price is 1,144
Equally divided rectangle: 1000 buys 3 floors, 1100 buys 3 floors, 1200 buys 3 floors, the average price is 1100
When the price rises to 1200, the profits are respectively: pyramid 145, inverted pyramid 56, rectangle 100
When the price drops to 1000, the losses are respectively: pyramid +55, inverted pyramid -144, rectangle -100
It can be seen from the comparison that the pyramid type has the lowest cost and the profit is greater when the price rises. When prices fall, risk tolerance is stronger. The inverted pyramid is just the opposite. If the price drops to 1,000, the inverted pyramid will lose 144. In practical application, it is more reasonable to use the forward pyramid method when buying and the inverted pyramid method when selling.
After the currency price drops sharply, when it bottoms out and we are not sure whether it has reached the bottom, if we buy at this time, we are afraid that it will continue to fall and be trapped. If we do not buy, we are worried that the market will reverse and rise and we will be short, so we can use the pyramid position building method.
Give a chestnut:
A certain currency falls to 10U, buy a 20% position, the price falls to 8U, and then enters 30%. At this time, the average cost is 8.6U.
If the market continues to fall to 5U and then enters 40%, the average price will be 6.5U.
If the price rebounds by 6.5 yuan, the capital is guaranteed. If it rebounds to 10U, it is equivalent to making 3.5U. But if you buy with a full position when the price is 10U, you will just unwind when the price returns to ten yuan.
When the currency price rises, the buying position should be larger when the price is lower, and the position should be gradually reduced when the price gradually rises. This buying method belongs to the right side of the position. Such costs are relatively safe. Even if the market falls as long as the holding cost does not fall below, there is no need to panic.
Since the initial position of this method is relatively heavy, the requirements for the first entry are relatively high, and you need to be able to grasp the market fluctuations, so it is suitable for technical players.
The inverted pyramid selling method is the opposite of the upright pyramid. It is wider at the top and narrower as you go down, resembling a funnel. When the currency price rises, gradually reduce the number of coins held, that is, the number of coins sold increases as the currency price rises. This is about how to reduce or clear positions.
The core of position management is the above points. After understanding it, I believe that in the future, whether it is building a spot position or a contract position, you will have an idea.
If you can see this, then I believe you are definitely a loyal fan of the currency circle!
Let’s start with practical teaching! (The following text will be explained in vernacular, Wen Zou Zou is afraid you won’t understand!)
Spot warehouse management
Example: You have one hundred thousand U, then you have to divide it into ten parts! Prepare to buy ten coins! Each currency is allocated 10,000U! Every entry is the same amount of money!
Example: Open a position in XX currency, 50% of the position at XX price, 50% of the position at XX price, where 50% of the position means that 10000U is allocated according to the standard of each coin, and 5000U is reserved for opening a position of 5000U to cover the position.
A big taboo in spot trading is to hold heavy positions that you are optimistic about and light positions that you are not optimistic about!
This coin is so good that I will buy more when I enter. I will buy 30,000 U.
This coin is so-so. I'll buy 10,000 U when I enter.
When operating, you should buy the same amount of each coin, and operate strictly according to the above example! If you don't follow this position, a problem will occur. The 30,000 U coins you bought with a heavy position lose 10%, which is 3,000 U. Then the 10,000 U coins you bought with a light position will count as an increase. If you pay 10%, it’s only 1000U, so you’ll still lose money!
Contract position management
The position allocation of ETH is calculated according to the number!
The maximum number of 1000u principal positions cannot exceed 5
The maximum number of 3000u principal positions cannot exceed 10
The maximum number of 5000u principal positions cannot exceed 20
The maximum number of 10,000u principal positions cannot exceed 30
The maximum number of 30,000u principal positions cannot exceed 50.
The maximum number of 50,000u principal positions cannot exceed 100
BTC position allocation is calculated based on the number!
The maximum number of 1000u principal positions cannot exceed 0.5
The maximum number of 3000u principal positions cannot exceed 1
The maximum number of 5000u principal positions cannot exceed 2
10000u principal position cannot exceed 3 positions at most
The maximum number of 30,000u principal positions cannot exceed 5
The maximum number of 50,000u principal positions cannot exceed 10
In fact, the initial principal of each contract is the same, and the number of orders placed is the same, so that you can easily place orders with K God in the contract group! Stop profit when it's time, take loss when it's time, treat yourself as an order-making machine!