In our trader interviews, many excellent traders emphasized the importance of position management and often reminded them to pay attention to position management when providing advice to other traders. This fully illustrates the key role of position management in trading. Today, EagleTrader will introduce a position management method that is completely different from the pyramid management method - the funnel management method. Let's see if it is suitable for you?

Funnel position management method

Funnel position management method is a commonly used position management method. Its core idea is that the initial entry amount of funds is relatively small and the position is lighter. If the market runs in the opposite direction, the position will be gradually increased in the future market, and then the cost will be diluted, and the increase rate will be larger and larger. The position control of this method takes a shape that is small below and large above, much like a funnel, hence the name.

Funnel management method is suitable for traders who have strong judgment on market trends and can withstand certain risks. It is suitable for use when the market trend is relatively clear, because profit can be achieved by gradually increasing positions only when the market trend meets expectations.

Operation steps of funnel position management method

1. Initial entry: Select a smaller amount of funds for initial transactions to reduce initial risks. For example, if the total fund is $10,000, the initial entry fund can be set to $1,000.

2. Strategy for increasing positions: If the market falls, gradually increase positions according to the pre-set ratio. Common increases are 2:3:5 or 1:2:3:4. For example, invest $2,000 when the initial increase is increased, invest $3,000 when the second increase is increased, and so on.

3. Risk control: Every time you increase your position, you must re-evaluate the market trend and your own risk tolerance. If the market trend is consistent with expectations, continue to increase positions; if the market trend is uncertain or the risk is too high, you should stop increasing positions.

Risk Management Suggestions

Set stop loss point: Every time you increase your position, a reasonable stop loss point should be set to prevent excessive losses caused by adverse changes in the market.

Flexible adjustment strategy: Flexible adjustment of the increase of positions according to market changes and your own capital situation to avoid blindly increasing positions.

Fund management: allocate funds reasonably to ensure that available funds will not be excessively occupied during the increase of positions, and avoid passive situations caused by difficulties in capital turnover.

Funnel position management method characteristics

Initial risk is small: Due to the small amount of initial entry funds, even if the market runs in the opposite direction, it will not cause too much loss to the account.

High profit potential: Without a liquidation position, profit will gradually increase as the increase in the proportion of positions increases. If the future trend meets expectations, the profit will be very considerable.

Risk increases with the increase in position: as the market moves in the opposite direction, the position will gradually increase, and the risks borne will also increase accordingly. If the market is in a unilateral opposite trend, it may lead to a liquidation.

Rely on future market trends and judgments: Funnel position management method needs to be based on the premise that future market trends and judgments are consistent. If the direction judgment is wrong or the trend cannot exceed the total cost level, it will be in a situation where it cannot make a profit and be eliminated.

Overall, the funnel position management method is indeed a risky strategy, but it is stronger for those withFor traders who have the ability to judge market trends and can take certain risks, it is still an option worth considering. However, given that its advantages and disadvantages are obvious, traders who intend to adopt this method need to carefully evaluate whether their conditions are truly suitable to ensure that they can effectively control risks while pursuing profits.