In contract trading, applying zero-sum thinking is fundamentally about establishing awareness of the opponent's position: every penny you earn comes from the opponent's loss; every dollar you lose becomes the opponent's profit. Based on this logic, take-profit and stop-loss strategies are not just mathematical problems, but also issues of psychological games and capital management.
Based on zero-sum thinking, you can optimize your strategy from the following dimensions:
1. Take Profit: Don't fantasize about eating the last coin.
In a zero-sum game, when prices reach extremes, the opponent's position will collapse. The take-profit point needs to be set before the opponent's position collectively liquidates, or before the opponent concedes and exits.
· Look for 'leverage liquidation dense areas'
You can use tools (like Coinglass's liquidation heatmap) to observe. If the price approaches a liquidation point of a large number of short positions, these shorts will turn into buy orders, pushing the price up. However, as a long position, do not wait until all the shorts have been liquidated. Once the last straw is broken, the strong buying pressure will disappear, and the price may quickly fall. Right-side traders can take profits as the liquidations accelerate, while left-side traders should exit early before large liquidations occur.
· Observe the 'desperation of the opposing positions'
When market sentiment is extremely unified, like when you see the community collectively shouting 'kill the shorts', it indicates that the potential long power has been exhausted. In a zero-sum game, when the opposing positions are all dead, you lose your source of profit. At this time, even if technical indicators haven't peaked, you should consider taking profits.
2. Stop-loss: Your bottom line is the opponent's feast.
In a zero-sum game, stop-loss must be set before the position that the opposing players believe you 'will definitely die' at.
· Beware of 'liquidity hunting'
Large funds (main players) usually monitor retail investors' stop-loss orders. If everyone sets their long stop-loss at $58,000, the main player might intentionally drive the price down to $57,900, triggering your stop-loss, and then pull it back to the original price. Your loss becomes their profit.
· Strategy: Do not place stop-loss orders at round numbers (like $60,000) or at obvious support levels visible to everyone. You can place them slightly away from the crowd, such as at $57,888, to avoid dense trading areas.
· Don't hold positions
Zero-sum games with high leverage mean that holding positions not only loses money but also incurs funding fees. Your losses are others' profits; the longer you hold, the more the opposing positions earn. Set a time stop-loss; if the trend goes against expectations within half an hour, it indicates a possible misjudgment, so exit and observe.
3. Entry Point: Look for asymmetric 'opponent position advantage'
Before entering, you can ask yourself: whose money am I going in to earn?
· Earn money from 'liquidation orders'
If the price is at a certain level, a mere 1% fluctuation could trigger massive liquidations of opposing positions. This level is a great entry point because the price may be drawn to it like a magnet. You can place orders at a safe distance to capture the accelerated market movement caused by liquidations.
· Earn money from 'cut-loss orders'
When the price breaks below a range, you can observe the trading volume. If the drop is accompanied by huge trading volume (many people cutting losses), this may be the last drop. Because the opposing positions are already dead, selling pressure is exhausted; entering at this time means your opponents are those who are cutting losses.
4. Comprehensive Strategy Example
Assuming you are a day trader going long, you can develop a plan using zero-sum thinking like this:
1. Analyze the opposing positions: Discover a large number of short positions at 1% below, and a large number of long positions stuck at 0.5% above (potential selling pressure).
2. Entry: If the price drops to a dense area of short positions and quickly recovers after a false breakout, you can enter long (the goal is to earn money from the liquidation of shorts).
3. Stop-loss: Place it slightly below the dense area of short positions (to prevent being stopped out by a spike).
4. Take profit: Exit in batches before the price reaches the upper long position area. Once you take profit, it may trigger those long positions to sell off, and if profits are not taken, the price may easily be pushed back down.
Overall, using zero-sum game thinking is a constant reminder that the market is brutal, and your profits depend on your opponent making mistakes. You need to spot errors earlier than your opponent and secure profits before they correct their mistakes. $PIPPIN
