In the midst of strategizing, we can win from a thousand miles away. Hello everyone, I am Lin Chao, a global financial market observer, focusing on cryptocurrency market analysis, bringing you the most in-depth trading information analysis and technical teaching.

Recently, I have received many private messages from fans asking me to talk about basic position management. Today, we will discuss the importance of position management from several perspectives and when it should be implemented.

First of all, the cryptocurrency market is different from other financial markets; it is a 24/7 non-stop market, meaning there are no market closures, and trading can start or end at any time. Due to this characteristic, many people treat it like a casino, even sacrificing their rest time to participate in market trading continuously. I must first deny this trading method. Physical health is the foundation of everything, and this option should always be prioritized. Therefore, the first thing we need to do is plan our trading time. Just because the market doesn’t sleep doesn’t mean we shouldn’t rest. I personally choose to trade during the day, which means I start calculating as soon as I open my eyes, with a maximum trading time of 12-16 hours a day. Once the trading time is determined, how should we reasonably plan our capital?

Spot Position

I have detailed the concept of tools in previous articles (see earlier article "Survival Guide in the Cryptocurrency Market"), so I won’t provide examples here. So, what percentage of our funds should be allocated to spot trading? My suggestion is 50%-60%. For example, with $100,000, our spot investment would be about $50,000 to $60,000. It’s important to understand that this $50,000 should not be invested all at once, as that would be akin to going all in. Even for spot trading itself, we should manage our positions separately.

4-Stage Position Layout:

Each stage accounts for 25%, meaning: total funds are divided into 4 parts, gradually building positions according to different price ranges.

Initial Position 25% for initial entry, exploratory trading

Add Position 25% after confirming the trend

High (Low) Position Add 125% (positive/negative) when the trend continues to raise the average position price

High (Low) Position Add 225% (positive/negative) as the last add point in a strong market

Avoid full positions at once: This allows you to have positions early in the market but not to "gamble all in"; even if the market fluctuates in the short term, you can maintain flexibility in your positions: you can reduce positions, take profits, or cut losses at any time, rather than holding on until the end.

Contract Position

Contract trading is also an essential part of our tools. Its function is that once we are in a headwind in spot trading, whether we misjudge or the entry point is not ideal, we can use the flexibility of contracts to make short-term adjustments at any time. However, I must emphasize that contract trading is not gambling. High-leverage trading can often be exciting but also severely tests one’s mindset. Using 10x or 20x leverage, every small fluctuation can lead to liquidation. The benefit of using low leverage (such as 2-5x) is that it allows for a buffer against fluctuations, preventing total loss from a single misjudgment. At the same time, it can hedge against spot positions.

Taking Bitcoin as an example, if we hold one Bitcoin and the entry point is not ideal, and suddenly there is a rapid decline in a short time, we can use contract trading to lock in price changes. If buying one Bitcoin in spot requires $100,000, then opening a position with 5x leverage only requires $20,000, which not only increases the efficiency of capital use but, more importantly, allows us to lock in losses at a minimal cost. The proportion of contract funds in the overall capital is about 20%, and like spot trading, it should not be entered all at once. Adjust according to the spot ratio and leverage ratio. Finally, the remaining 20%-30% of funds should be used for flexible position adjustments. Whether in spot or contract trading, when the market moves unexpectedly, this fund is used to respond urgently to "black swan events."

Many users also privately message me, expressing that their trading capital is limited, and they can't even buy one Bitcoin. So how should they manage their positions? Many people, due to limited capital, hope to invest in a certain altcoin, betting small to gain large, doubling their capital or more. Here, I want to tell everyone that rather than placing hope in a certain altcoin to rise, it is better to think about how to apply the above position management standards to mainstream coin contracts, as the risk of small coins going to zero is far greater than the risk of contract liquidation.

For example, with $50,000 in capital, using 5x contract leverage allows you to buy 2.5 Bitcoins. For every $1,000 increase in Bitcoin, our profit is $2,500. Considering the recent volatility of Bitcoin, the maximum daily fluctuation is around 5-6%. We only need to make 5 successful trades for our capital to double. However, Bitcoin at least does not have the risk of going to zero; it is almost impossible for it to drop below $50,000, and the flexibility of contracts allows us to adjust our direction based on market trends during trading. Instead of buying altcoins and letting others control your fate, it is more reassuring to take control of your own destiny.

Of course, I am not encouraging everyone to become obsessed with contracts. Especially for novice users, do not think that you can get rich overnight through contracts. Those with a gambling mentality should stay away from this market. There is no market where you can only earn without losing, nor is there a one-size-fits-all method. Only by continuously trying to establish a systematic trading system can one profit in this market. Everyone should understand that even in a favorable market environment, there is not enough capital to push every coin in the market to rise. Capital is always profit-driven. When you receive so-called "insider information," waiting for funds to pump altcoins, you should think more about the authenticity of that information. So do not blindly chase after "hundredfold coins"; even if they exist, they will not come to ordinary people like you and me.

At the same time, everyone should learn different ways to manage positions. Diversifying positions allows for a fallback and stabilizes the mindset. This prevents falling into the trap of "not running when making money, and being unwilling when losing." In fact, in trading, the market is often not the culprit that kills you; it is the mindset. The two typical mistakes that ordinary retail investors easily make are: not exiting when profits are in hand: greed makes people always want "to earn a little more," resulting in profits evaporating overnight; not setting stop losses with heavy positions: sleeping without stop losses is a major taboo in trading, especially in highly volatile coins.

We can prevent emotional mistakes through "staged position building + low leverage hedging." In the high-volatility market of cryptocurrencies, emotions are the noose, and positions are the armor. Every trade carries uncertainty; therefore, reasonable position management is fundamental. The risk of each trade should be strictly controlled as a proportion of total funds, ensuring that even if losses occur, it will not affect the stability of the trading system. You may not have the ability to judge correctly all the time, but you can fully control risks to the greatest extent even in extreme market conditions through the methods I shared above.

The market is always the market; the harsh reality will not change because of your losses, nor will it stop because of your tears and complaints. To change your fate, you must continuously learn investment skills and improve your strength to truly stand firm. The biggest prison in the world is the consciousness of human thought. If you cannot earn money beyond your cognition, then learn to leverage.

The global market is ever-changing, and the world is a whole. Follow Lin Chao to gain a top-tier global financial perspective.

For real-time consultation, please follow the public account: Lin Chao on Cryptocurrency.

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