The right direction is but the trades are lost? What traps traders are often position management

In multi-item trader interviews, we found that more and more traders are on EagleTrader
The importance of position management is gradually recognized during the exam. Strict examination rules help them discover their own trading loopholes.

According to the examination results, those traders who can survive for a long time do not rely on frequent “god predictions”, but achieve controllable losses and stable returns curve through rigorous position control. It can be seen that position management plays a hidden role in determining life and death in trading.

The essence of positions is risk allocation

The core of position management is not “how many moves to do”, but how to allocate risks. For every transaction, traders must answer two questions before entering the market:

If the stop loss is triggered, how much will my losses account for a percentage of the total funds?

If there are 5 consecutive losses, will my account still bear it?

In other words, positions are not a question of capital utilization, but a design of risk tolerance. Most of the liquidation does not result from wrong direction, but because the risk of a single transaction is too large and the continuous losses cannot be digested.

Strategy 1: Fixed risk ratio

Fixed risk ratio is the most commonly used position management method. It emphasizes that in each transaction, losses are only allowed to be controlled at a certain percentage of the account funds, usually 1%–2%.

For example, the account funds are $10,000, and if the single risk is set to not exceed 2%, the maximum loss is $200. If the stop loss point is 30 points, the allowed lot is about 0.67
hand. Regardless of the market conditions, this rule ensures that a single loss will not destroy the account.

The advantage of this strategy is that it is highly disciplined and the drawdown is controllable. However, in the stage of rapid capital growth, it may lead to a small position, thus limiting the speed of profit amplification.

Strategy 2: Dynamic adjustment of volatility

The market is not always in the same volatility environment. Driven by trend outbreaks or events, the fluctuation range often increases significantly. If a fixed position is still maintained at this time, the risk exposure will expand sharply.

Therefore, some traders will dynamically adjust their positions based on indicators such as ATR (average real volatility):

The volatility increases → narrow positions to avoid being thrown out of the market;

The volatility decreases → Moderately enlarge positions to improve capital utilization efficiency.

The advantage of this method is that positions adjust with the change of market rhythm, which is more in line with the actual risk level. But its disadvantage is that its calculations are complex and requires traders to have sufficient discipline to execute.

Strategy 3: Increase positions with the trend and stop losses against the trend

In a trend market, position management should not be just defense. Some traders will adopt the “pyramid-type increase in positions” method: the risk is controlled within the minimum range when initially building a position, and gradually increase positions as the market confirms, but the number of lots of positions increased each time is less than the previous one. In this way, traders can achieve “profit rolling” under the premise that risks are controllable.

In contrast, it is to quickly reduce positions or even stop loss clearance during the counter-trend stage. The core logic of increasing positions is “increasing profits” rather than “replenishing positions due to losses”. Truly professional position management will never allow loss-making positions to continue to expand.

Strategy 4: Batch take-profit and smoothing of capital curve

In position control, batch take-profit is a common strategy. Some positions reach 1:1 or 1:2
The risk-return ratio is the first to close the position, and the remaining positions continue to hold to gain a bigger trend. This method can psychologically reduce the pressure of profit rebate while improving the smoothness of the capital curve.

Although this method may reduce the profit-loss ratio of a single transaction in the long run, from the perspective of overall account management, it can improve the stability of returns.

Common misunderstandings:

Errors in position management are often more fatal than technical judgment errors:

A desperate bet: bet most of the funds in a single direction, and the result is a single loss that will hit the account hard.

Replenish positions and increase the position: When the market is unfavorable, the cost will be constantly flattened, and the positions will become larger and larger, and eventually the ability to bear will be lost.

Ignore fluctuations: Maintaining the same position as usual in high volatility events (such as non-agricultural and interest rate resolutions), it is very easy to cause stop loss to be quickly broken through.

Blind imitation: When other traders with larger funds go down 10 lots, they copy their positions without considering their own capital scale and risk tolerance.

The common point of these misunderstandings is that they lack systematic risk control logic.

Practical thinking:

Many traders will regard position control as a “restriction” in the early stage, and feel that it is difficult for small positions to make profits quickly. But as trading experience accumulates, we gradually realize that positions are actually the “armor” to protect funds and mentality.

A common comparison is:

Traders with heavy positions are often glamorous in the short term, but are prone to lose all the market due to one mistake;

Traders with stable positions may not be amazed, but they can travel through the cycle and eventually accumulate considerable returns.

The significance of position management lies inAllow traders to trade continuously, rather than “break up with one blow” in the market.

Position management in trading is not to give up profits, but to ensure that you can live to the next opportunity outside of profits. The trading system determines whether you can discover opportunities, and position management determines whether you can seize profits and stay in the market for a long time.

As a trader often says:

“There are many people who can look at the market, but those who can control their positions can truly go far.”