《The Complete and Refined Version of How to Unwind a Position》

How to unwind? First, you need to understand how the position was formed and how you got into it.

First: The wrong direction was taken—chasing gains and cutting losses in the wrong way. When at the upper band, reduce long positions to protect capital, raising the breakeven point; this is also the time to start trying to enter short positions. When a certain coin is stuck at a resistance level and cannot move up, it’s the time to open a short position. At this point, you should reduce long positions or exit, rather than chasing the rally. Conversely, when the price is falling sharply, it’s reversing the previous approach—these are all signs of a wrong direction.

Second: Poor position management. Position management is extremely important, second only to correct market direction judgment.
If the initial position is heavily weighted, subsequent capacity to add positions diminishes, leading to increasingly heavy positions, and the final result is only one thing—liquidation.

The correct strategy should be: first, label the initial entry with 1U; then, add a small position at the second entry; and enter with a normal position at the third. Do not over-leverage.
Over-leveraging results in an inability to add more positions, so it’s essential to leave enough room above the current resistance level for adding positions later.

Third reason: Greed.
If profits are not taken, floating gains are just illusions; unrealized gains are meaningless, and unrealized losses are just paper losses. The gains are only on paper, just a glance at the potential.
After setting a breakeven stop-loss, the position remains profitable and will not generate floating losses.

Fourth: Not strictly following your trading strategy.
When it’s time to enter, you hesitate; later, you miss the entry opportunity.
When it’s time to lighten the position, you instead add more and chase the market, then cut losses or take profits prematurely.
These factors combined lead to being trapped and temporarily unable to unwind.
Therefore, strictly following your trading plan can help avoid getting caught.

These four reasons stack up and lead to being trapped.

Summary:
1. Chasing gains and cutting losses in the wrong direction.
2. Poor position management—initially heavy, unable to add later.
3. Greed—floating profits turn into floating losses, compounding the previous mistakes.
4. Having a plan but not strictly executing your trading strategy.

How to unwind:
1. Exit near the entry price (exceeding or close to the entry price) or when slightly profitable (the optimal solution).
2. When the market direction was correct but you missed the opportunity due to reasons like not monitoring the chart in time.
(1) For heavily leveraged positions, refer to the first point—do not add more; if caught long, approach the next level of resistance and strictly execute one of these actions: reduce the position or just run away—admit the mistake and treat it as tuition.
(2) For lightly leveraged positions, there are two scenarios:
- First, run near the resistance level—run, run, run.
- Second, miss the chance to reduce at the current resistance level, then add three times the position at the lower band to average down, and then exit when slightly profitable near the entry price. No matter how big the profit later, do not be greedy.

A particularly important note: profits can be left uncut, aiming for better positions is acceptable, but you must set a breakeven stop-loss. The goal is to avoid losses, not necessarily to make profits.

Through analysis, what is the best solution to unwind?

1. For positions with poor entry points, slightly profit near the entry price (wait for the dip, as dips are inevitable), then close and run, restoring your freedom.
It’s also acceptable to not profit, just take a small loss to exit—proper stop-loss is to better preserve the principal. Capital preservation is more important than profit.
Actually, when opening a position, the first consideration is not how much you can earn, but how much loss you can accept. First, consider the acceptable loss, then focus on capital preservation, and finally on profit. (Prioritizing capital preservation over profit.)
Of course, the premise is to dare to try and make mistakes—without trying, there’s no subsequent opportunity. No losses, no profits.

2. Any position with a small size can be topped up at key levels—adding three times the position to average down, then slightly profit or reduce at the entry price, or just run away.

3. Not recommended but still an option: increase margin, average down at key levels, then repeat the optimal solution—run near the entry price.

Another point: there is never a perfect position, only relatively good ones. There is no best, only relatively good. Dare to try with small positions to test, only then can there be subsequent opportunities. Without trying, there’s nothing.

4. Extreme case unwinding strategy: if about to be liquidated, what to do? Quickly lock the position to preserve capital.
Open a hedge in the opposite direction: open a position in the opposite direction with 50% of the margin of the original position, and set a breakeven stop-loss after profits are realized to prevent floating losses and to prepare for the next unwind if needed.