Recently, a friend asked me why he always buys at the high points and sells at the low points in his investments. I carefully discussed his trading approach and found that the problem lies in his habit of investing all his funds at once. I understand this idea; after all, it’s simple to operate, but it also carries the greatest risk.

In fact, the art of building a position is much deeper than it seems. I discovered that many people overlook a fundamental principle—batching. Building a position in batches may seem troublesome, but it is actually the best way to reduce costs and hedge risks. Imagine if you enter the market in multiple steps, not only can you buy more at lower prices, but you can also avoid total loss caused by a single misjudgment. The same logic applies to reducing holdings; staggered exits can protect profits while controlling risks.

So, what are the benefits of building a position in batches? First, it can avoid traps of being manipulated into a short or long squeeze. Second, it helps spread out costs while managing risks. Lastly, it can ensure relatively stable returns. Of course, the batching strategy is most suitable during stable market conditions; if there are sudden surges or crashes, then different considerations apply.

Regarding specific methods of building a position, I have used three main approaches. The first is the index-building method, which simply means buying more as prices fall and buying less as prices rise. For example, dividing funds into ten parts, buying 1 part during the first dip, 2 parts during the second, 4 parts during the third, following an exponential increase. Conversely, during an uptrend, you can build your position from large to small. This method is powerful but must be used cautiously.

The second is the pyramid-building method. Its principle is similar to the index method, but the size of additional purchases follows an arithmetic progression. For example, when chasing hot topics, it might be 30%, 20%, 10%, decreasing each time. If the price pulls back during an uptrend, you can add to your position in reverse. This approach is especially suitable for capturing high-momentum themes.

The third is the equal-division method, the most gentle approach. Distributing funds evenly and entering the market gradually during a trending market, also participating equally when there are opportunities to add. This method carries the lowest risk and is particularly suitable for risk-averse investors. In choppy markets, it can be effective for high sell and low buy strategies.

There are four key points to pay attention to during the building process. First is the stop-loss point, which should be set below the cost basis, based on the amount of loss you can tolerate. In a bull market, you can loosen this; in a bear market, tighten it. Second is the take-profit point, which is a line of defense to protect gains, and must be set above the cost. Third is the historical low point, which is relatively easy to judge. Fourth is the cost point, and all decisions should be based on this reference.

Honestly, the most important aspect of investing is not short-term gains but mastering these position-building methodologies. As long as you truly understand the logic behind batching, no matter how the market fluctuates, you can maintain relatively stable performance. This is also why many experienced investors can seize opportunities at critical moments.