How to Build a Position Reasonably

1. [Funnel Position Management Method]
The initial amount of capital entering the market is relatively small, the position is relatively light, if the market falls, the market gradually increases the position, and then dilutes the cost, and the proportion of increasing the position is getting larger and larger. In this method, the Position Control is a form of small below and large above, much like a funnel, so it can be called a funnel-shaped Position management method. Common Position ratios are 2:3:5 or 1:2:3:4.
Advantages: The initial risk is relatively small, and the higher the funnel, the more profitable it is without getting liquidated.
Disadvantages: This method is based on the premise that the future market trend is consistent with the judgment, if the direction is wrong, or the direction of the trend can not exceed the total cost price, it will fall into a situation where it is impossible to make a profit.
Under this Position management method, the more Reverse Fluctuation, the greater the open interest, the higher the risk will be, when the Reverse Fluctuation amplitude reaches a certain level, it will inevitably lead to cross holding, and at this time, as long as the direction is Fluctuation in the opposite direction, it will lead to Get Liquidated.
II. [Rectangular Position Management Method]
The amount of funds entering the market at the beginning, accounting for a fixed proportion of the total funds, if the market fall, and then gradually increase the position, drop costs, increase the position follow this fixed ratio, the shape is like a rectangle, which can be called a rectangle Position management method. Common Position ratios are 1/3, 1/4, 1/5.
Advantages: only a certain percentage of Position is increased each time, the cost of Holdings is gradually raised, and the risk is evenly distributed and managed. In the case that the Holdings can be controlled, and the future market direction and judgment are consistent, you will get rich returns.
Disadvantages: In the initial stage, the average cost rises quickly, and it is easy to quickly fall into a passive situation, and the price cannot cross the breakeven point and is in a trapped situation.
As with the funnel method, the more Reverse the movement, the larger the open interest, and when it reaches a certain level, it will inevitably be fully held, and the price only needs to move a little in the opposite direction, which will lead to Get Liquidated.
III. [Pyramid Position Management Method]
The initial amount of capital entering the market is relatively large, and if the market runs in the opposite direction, it will no longer increase the position, and if the direction is the same, gradually increase the position, and the proportion of increasing the position is getting smaller and smaller. Position control is large at the bottom and small at the top, like a pyramid, so it is called a pyramid-shaped Position management method. Common Position ratios are 5:3:2 or 4:3:2:1.
Advantages: Position control according to the rate of return, the higher the win rate, the higher the Position used. Take advantage of the persistence of the trend to increase the position. In a trend, there will be a high return and a low risk rate.
Disadvantages: In a volatile market, it is difficult to make profits. The initial Position is heavier, and the requirements for the first entry are relatively high.
Comparison of the three Position Management Methods:
1. The funnel-shaped Position Management Method and the Rectangular Position Management Method are that after the first entry, the market runs in the opposite direction, but it is still confident that the later trend will run according to its own judgment and carry out Position Management. The pyramid Position management method is that after entering the market, if the market moves in the opposite direction, the increase the position operation is not carried out, and if the stop loss is reached, the stop loss is carried out. The first two methods belong to the contrarian operation method, while the latter is the trend-based operation method.
2. Funnel-shaped Position Management Method and Rectangular Position Management Method, the correct premise is that the market after the market is carried out according to the predicted trend, and the Position is getting heavier and heavier, without getting liquidated, you can get profits, and for investors, the risk is greater. The pyramid Position management method, in the long, is the risk of losing a certain percentage of the first entry capital, rather than the entire capital.