Today we are going to talk about a topic that sounds very dull, but can actually save your life: position management. This is a lesson I learned with a capital of 200,000, and it is the key to my survival through two bull and bear markets.
In January 2018, Bitcoin plummeted from 20,000 USD, and I thought, 'The opportunity has come,' so I gambled all my savings of 120,000 in one go. When it dropped to 12,000, I thought it was a chance to increase my position and borrowed 50,000 on my credit card. When it fell to 10,000, I panicked, but thought, 'It has dropped so much already,' and borrowed another 30,000 from a friend to continue 'buying the dip.'
In the end, Bitcoin dropped to 3,000 USD. My 200,000 was left with less than 50,000. Even worse, I needed money to pay off my credit card and my friend, and was forced to sell at the bottom.
This disastrous defeat made me realize: in investing, how you buy is more important than what you buy. Today, I will share the position management principles that I learned at the cost of 200,000 yuan with you.
1. The three major pitfalls of 'all-in'
Pitfall 1: Instant mental collapse
When you invest all your funds at once, your mindset becomes tied to the price. If the price rises a bit, you worry about a correction; if it falls a bit, you fear being heavily trapped. Those fully invested have no decision-making power, only the power to pray.
Pitfall 2: Losing all initiative
The most brutal aspect of the market is that the bottom is always lower than you think, and the time to grind the bottom is always longer than you think. When you are fully invested and trapped while the market continues to fall or remains stagnant for a long time, you can only watch helplessly, with no way out. Having no cash is like being on a battlefield without bullets.
Pitfall 3: Zero tolerance for error
Investment is essentially a probability game; even the best will make mistakes. All-in means you only have one chance: if you're right, it's heaven; if you're wrong, it's hell. But the market specializes in treating various superstitions of 'I will definitely be right this time'.
2. My 'Three-layer Position Management Method'
After heavy losses, I spent three months studying position management and finally summarized a set of 'three-layer position method' suitable for ordinary people.
First Level: Cornerstone Level (40%-50%)
Assets: Only buy Bitcoin and Ethereum
Strategy: Regular investment + long-term holding
Goal: Do not pursue excessive profits, only aim not to underperform the market
Mindset: Treat this part of the money as 'saving in the bank', at least for 3 years
This is my 'ballast stone', ensuring I won't capsize in any storm.
Second Level: Flexible Level (30%-40%)
Assets: Bitcoin, Ethereum + 1-2 leading projects I have deeply researched
Strategy: Trend tracking + swing trading
Goal: Achieve excess returns
Discipline: Single transaction loss does not exceed 10% of this level
This is my 'main force', used to win battles, but always ready to retreat.
Third Level: Cash Level (20%-30%)
Form: Stablecoin or fiat currency
Purpose: 1. Respond to life emergencies 2. Wait for extreme opportunities
Discipline: Stick to it, unless a golden opportunity arises
This is my 'reserve team' and 'lifeboat', ensuring I always have options.
3. How to scientifically 'bet': three core formulas
Formula 1: Single stop-loss amount ≤ 2% of total funds
This is the soul of position management. Suppose your total funds are 100,000 yuan, then the maximum allowable loss for a single trade is 2,000 yuan. If you set a stop-loss of 10%, then you can buy a position of up to 20,000 yuan. This formula forces you to bet small on highly volatile assets and enlarge positions on stable assets.
Formula 2: Buy in batches, at least in three times
When you focus on an asset, don't buy it all at once. I usually divide it into three batches:
First batch (30%): Buy when breaking through key positions or reaching value ranges
Second batch (40%): Buy when the price confirms a pullback or continues to fall by a certain percentage
Third batch (30%): Keep as backup, increase positions only after the trend is fully confirmed
This way, you won't completely miss out nor buy at the highest point.
Formula 3: Gradually raise the stop-loss after profit
When an investment starts to make a profit, I will move the stop-loss to the break-even point to ensure this trade at worst breaks even. As profits expand, I gradually move the stop-loss along the trend line (e.g., following the 20-day moving average). Let profits run, but fasten your seatbelt.
4. Position strategies under three classic market conditions
Mid-bull market:
Cornerstone Level: Hold steady
Flexible Level: Follow the trend, gradually take profits
Cash Level: Maintain over 20%, waiting for a pullback
The secret to a bull market is 'to hold on', do not change vehicles frequently.
Bear market bottom:
Cornerstone Level: Increase the intensity of regular investments
Flexible Level: Small position exploratory building
Cash Level: Maintain over 30%, waiting for extreme panic
The secret to a bear market is 'endurance', trading time for space.
Volatile market:
Cornerstone Level: Hold steady
Flexible Level: Reduce positions, decrease operations
Cash Level: Stay put
The secret to a volatile market is 'not to fidget', waiting for directional choice.
5. Start your position management plan
If you are still in an all-in style, I suggest:
Step 1: Reallocate
No matter how your current position is, immediately reallocate according to the ratio of 'Cornerstone Level 50%, Flexible Level 30%, Cash Level 20%'. You may need to sell some or buy some, but this is the first step in building a system.
Step 2: Write down the rules
Write your position management rules on paper and stick them next to your computer. Include:
The range of ratios for each layer
Maximum loss for a single transaction
Under what circumstances can the ratio be adjusted
Step 3: Strictly execute
For the next three months, execute these rules like a robot. Don't ask why, just execute. After three months, you will thank this 'ruthless' self.
From all-in to scientific betting, my biggest change is not how much my profits have increased, but that I can sleep at night. I know that no matter how the market moves, I have a plan. If it goes up, I have positions to enjoy the profits; if it goes down, I have cash to increase my positions; if it goes sideways, I have time to live well.
This is the essence of investing: create a sense of security through position management, support a good mindset with that security, and make good decisions with a good mindset. When you are no longer bound by ups and downs, the market will start to reward you.
If you have also suffered losses in position management or want to know more about stop-loss and take-profit practical skills, follow me@币圈罗盘
Remember, in the crypto world, position management is not an elective course; it is a survival course. If you can't learn this, you will always be a gambler, not an investor.
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