Why can't you Heavy Position in trading?

The three major taboos in trading: going against the trend, not stopping losses, and Heavy Position. Due to many traders' deep-rooted mindset of trying to catch the bottom and top, many people become risk-seeking when facing losses. They are unwilling to admit losses, so the issue of not stopping losses is also difficult to change.

Compared to the previous two, the problem of Heavy Position is the easiest to solve. However, in reality, most traders only tell themselves not to take Heavy Positions after experiencing a significant setback. Yet, even knowing they shouldn't take Heavy Positions, they still can't control their hands when they return to actual trading and continue to take Heavy Positions. Why do traders like Heavy Positions?

Overall, it is greed, worrying about missing out on big market movements, and fearing not making the profits that should be earned. However, from a human nature perspective, people enjoy the thrill of making heavy positions to achieve quick satisfaction and the joy of winning huge profits, much like those who enjoy gambling, making it hard to quit.

Newcomers who have just entered the trading market have not experienced the baptism of the market and have not felt the risks of the market. They often think trading is too simple and have a strong desire to make money. Therefore, they easily take a Heavy Position as soon as they start. They may hit a favorable market and earn huge profits beyond expectations, making them even less accustomed to the slow growth of a small position. However, luck won't always be on their side; taking a Heavy Position will inevitably lead to significant losses. After suffering substantial losses, it becomes very difficult to earn back the principal in the short term, and the psychological pain is also considerable. In order to quickly regain the principal, they may feel the need to take even larger positions, resulting in larger and larger losses, potentially leading to bankruptcy.

There are still many people who are accustomed to Heavy Position, because only with a Heavy Position can the brain secrete dopamine, resulting in that kind of pleasure. If it is changed to a light position, the stimulation decreases, so there is inner resistance.

When I first started trading, I also believed that only a Heavy Position could make money. However, as my trading concepts and trend systems matured, I realized that the impact of position on profitability is significant. It is difficult to achieve stable profits with a Heavy Position, and it can easily lead to substantial losses. Many people do not appreciate the importance of position because they have not yet crossed the profitability threshold and have not formed their own trading concepts and systems. Both Heavy and light positions can lead to losses, but once one has the ability to profit, the importance of position becomes apparent.

Because futures have leverage, trading with a Heavy Position can still lead to significant losses even if you are on the right side. For example, many people like to buy the dip, especially with a Heavy Position, but even if you time the dip correctly, many markets will often give you a deep wash before the rally starts. If your position is too heavy, you might get wiped out just before the dawn, only to see the price rise afterward. Additionally, trading with a Heavy Position in the trend can be risky; if a significant pullback occurs, the large position size may lead to forced liquidation due to the extent of the drawdown. Furthermore, when you hold a Heavy Position, your stop-loss levels for each order will be relatively small, resulting in lower risk tolerance and frequent stop-loss triggers. Most importantly, a Heavy Position can easily lead to emotional loss of control for traders; not many can remain calm when facing significant losses in their accounts. This emotional turmoil can severely impact rational judgment in subsequent trades.

The dangers of Heavy Position are significant, so how can we address the issue of Heavy Position? Captain Lao offers a few suggestions for your reference:

First, we need to lower our profit expectations. Trading is a long-term process, and we should treat it as a long-term business. Don't think about getting rich quickly; set a reasonable profit target for yourself and steadily work towards it.

The second is to get yourself accustomed to controlling your position, or you can force yourself to operate with a light position for a period of time, such as not exceeding 20% of your position. Once you have developed the habit of controlling your position, you will resist the huge profit and loss fluctuations of Heavy Position and will no longer easily attempt to take Heavy Positions.

Thirdly, the actual verification data will tell us that Heavy Position will ultimately lead to demise. The nature of gambling is also a part of human nature, and Heavy Position is also part of our nature. Therefore, once this addiction sets in, many people will lose control. However, using scientific data to inform you of the results of Heavy Position can dispel the illusions in your mind and engrave this fact in your memory. As a result, we will not easily take Heavy Position again.

Many people take Heavy Positions to obtain high profits, but a lot of data shows that having a larger position does not necessarily mean earning more; in fact, it is quite the opposite. Under the rules that allow for profit, the outcome of taking Heavy Positions is often a loss, or even liquidation. The position that can yield high profits is the optimal position, but the optimal position is not a Heavy Position; it is a Light Position.

Therefore, in actual operations, we need to have a clear understanding of position management.