Why do you always get liquidated and cannot control your positions well?

Everyone who enters the market has his or her own reasons, whether it is for leisure and entertainment, small gambling, or for power struggle, hard work, or somewhere in between, but** The most unique feature is that you can earn points regardless of the amount.

But in fact, no one can change the approximate proportion of profits, losses, and losses in the market, and many people are destined to lose. There are many people who just didn't make it to the end and were forced to leave before their bull market came.

Therefore, one of the most important principles for survival in the market is to "preserve the principal." Ten thousand now may be 100 million in the future, and this has to talk about position management.

1: Why should we control positions

From a certain level, controlling positions is actually to control the total amount of risks, especially the prevention of accidents. The market is always like this. Even if you see the market direction correctly and choose a better entry point, you cannot avoid a small probability of accidents. For example, one or two stops suddenly come in the opposite direction, and then resume the previous trend. Things like this are not uncommon in the market. Only with proper position control can excessive losses be avoided.

Here I would like to remind every trader friend not to underestimate small probability events. Because no matter how many times you succeed, an unexpected incident may make your years of hard work go to waste. Therefore, in the field of venture capital, you must always keep an eye on the 5% of fatal accidents. Only when you are 100% sure that they will not threaten the life or death of your transaction can you give it a go. And controlling positions is the most basic way for you to control risks. If you can't do this well, then no matter how well you do other things, the result will be meaningless, just like any number multiplied by "0", it will be zero.

In addition, the reason why we emphasize the need to control positions is not only because it can control risks, but also because position management can expand profits. For example, a mid- to long-term trader, once he makes the right move, will increase his position in a decreasing manner every time he breaks through a resistance level. In this way, the position when he makes a profit is larger than when he makes a mistake. position.

2: Position management methods

There are three commonly used position management methods, namely, rectangular position management method, funnel-shaped position management method, and pyramid-shaped position management method.

1. Rectangular position management method

This method is that when opening a position for the first time, the amount of funds entering the market accounts for a fixed proportion of the total funds. If the market develops in the opposite direction, it will gradually Adding positions, reducing costs, and adding positions all follow this fixed ratio. The shape is like a rectangle, which can be called a rectangular position management method.

The advantage of the rectangular position management method is that only a certain proportion of positions are added each time, the position cost is gradually increased, and the risks are evenly shared, thereby achieving average management. Positions can be well controlled, and if the market outlook is consistent with your judgment, you will get huge returns.

The disadvantage is that in the initial stage, the average cost rises quickly, so traders can easily fall into a passive situation, the price cannot cross the break-even point, and they are trapped. Just like the funnel-shaped method, the more the price changes in the opposite direction, the larger the position will be. When it reaches a certain level, the entire position will be held. However, as long as the price changes a little in the opposite direction, it will lead to liquidation.

2. Funnel-shaped position management method

Funnel-shaped position management means that the initial amount of funds entering the market is relatively small and the position is light. If the market moves in the opposite direction, the market outlook will gradually increase the position. This further dilutes costs and increases the proportion of positions. In this method, the position control is small at the bottom and large at the top, much like a funnel, so it can be called a funnel-shaped position management method.

The advantage of this method is that the initial risk is relatively small. Without liquidating the position, the higher the funnel, the more substantial the profit.

The disadvantage is that this method needs to be based on the premise that the market outlook and judgment are consistent. If the direction judgment is wrong, or the direction trend cannot exceed the total cost level, you will be trapped in a situation where you cannot make a profit. Under normal circumstances, at this time, the position will be relatively heavy, the available funds will be relatively small, and there will be difficulties in capital turnover. In this position management method, the more the reverse fluctuation occurs, the larger the position will be and the higher the risk will be. When the amplitude of the reverse fluctuation reaches a certain level, it will inevitably lead to full position holding. At this time, as long as the direction A small fluctuation in the opposite direction will lead to liquidation.

3. Pyramid position management method

The pyramid position management method means that the initial amount of funds entering the market is relatively large. If the market moves in the opposite direction in the future, no more positions will be added. If the direction is the same, gradually increase the position, and the proportion of the increase will become smaller and smaller. The position control is in the shape of a large one at the bottom and a small one at the top, like a pyramid, so it is called the pyramid-shaped position management method.

The advantage is that the position is controlled according to the rate of return. The higher the winning rate, the higher the position used. Take advantage of the continuation of the trend to increase your position. In a trend, high returns will be obtained with a low risk rate.

The disadvantage is that it is difficult to obtain profits in a volatile market. The initial position is heavy, and the requirements for first entry are relatively high.

3 Three Principles of Position Control

1. The position should not be too heavy

In futures trading, the proportion of funds usually used should not exceed 30% of the total amount of funds. If the position is too heavy, small fluctuations on the market are enough to cause traders to suffer serious losses. Moreover, overweight positions will also affect the mentality during trading, which will in turn affect the trader's judgment of subsequent price trends. Remember, the most important thing about futures trading is to maintain a good attitude.

2. Don’t hesitate to add positions

At the beginning of the market, if the judgment of the market development shows that you can try to take a short position, and the development trend of the market in the later period will be in the same direction. , at this time, you should not hesitate to increase your position to a normal position, so as to achieve an increase in profits.

3. Never add to a position when you are losing money

For traders, if your account suffers a loss, it means that your grasp of the market is not very good. , or in other words, your entry point and entry timing are wrong. If you choose to increase your position when your account is losing money, once you encounter a unilateral market trend, your account will only suffer greater losses, and the results of the transaction can be imagined. Therefore, if your account has a loss, the best solution is to stop the loss resolutely, rather than hoping to increase the position to adjust the position cost.

To sum up, no matter which position management method you adopt, the key lies in execution. As a professional trader, don't let the impulse of the moment easily break through your position control standards.