Split position entry refers to splitting an order into several shares and then entering the market in batches. It is a trading strategy for position management and risk control.
Assuming that we plan to open 10 lots at a certain point of a certain product, we can open 10 lots at one time, or divide the 10 lots into several batches and enter the market in batches. Let's briefly grasp the way of splitting the list, which can be divided into two types:
The first, equal split
The second, unequal split
Suppose you plan to open 10 lots and split them into equal parts, as shown in Figure (1):
figure 1)
Of course, you can also divide the 10 lots into 10 equal parts, and open one lot at a time. Anyway, as long as the number of times multiplied by the multiple is equal to 10 lots, it is divided into equal parts.
Compared with equal splits, unequal splits require more splits, and the number of lots does not need to be equal each time, but the final sum is still 10 lots, as shown in Figure (2):
figure 2)
Why split orders and separate positions to enter the market?
Let’s take a recent crude oil trend as an illustration, as shown in Figure (3):
image 3)
K1 fell below the support level, and a medium and large positive line in K2 quickly reversed, forming a 2B structural pattern and a bullish engulfing line signal.
According to the entry method of the bullish engulfing line signal, the closing price of K2 is long, and the entry stop loss is set below the lowest price of the engulfing line.
Assuming that we plan to open 10 positions, then we compare the advantages and disadvantages of entering the market without splitting orders and entering the market with split orders.
Open a position and enter the market without splitting the order , open a position of 10 lots at a time at the closing price of K2, and set the stop loss below the lowest price of the engulfing line.
There are roughly two entry strategies for splitting orders and splitting positions :
Strategy (1) : Also open a position of 10 lots at the closing price of K2, but split it into 5 orders, each order enters 2 lots, and the stop loss is still below the lowest price of the engulfing line.
Strategy (2) : After the bullish engulfing line signal closes, it is also planned to open 10 lots, and split it into 3 lots, 1 lot with 5 lots, 1 lot with 3 lots, and 1 lot with 2 lots. At the closing price of K2, 1 lot of 5 lots will be entered into the market first, and the remaining 2 lots will be managed as a flexible position. According to real-time dynamic market changes or pullbacks, buy long positions or increase positions in the future market.
In Figure (3), the callback lows of K3, K4, K5, and K6 are opportunities for maneuvering positions to enter the market on dips and go long. K6 with a certain lower shadow line breaks through the small shock range of K3, K4, and K5 at the close, which can be used as a The point where the maneuver position breaks through to do more.
So, what is the significance of splitting orders and splitting positions into the market?
The most important significance lies in position management and risk control .
Entering the market regardless of positions, 10 lots per order, adding and reducing positions in the market outlook is very passive, which is not conducive to position management.
Splitting orders and splitting positions into the market is not only different in the signal entry strategy, but also the operation of adding and reducing positions in the future market is relatively flexible, which is conducive to position management.
Continuing with the above crude oil as an example, we will explore the position management of entering the market regardless of positions and positions, as shown in Figure (4):
Figure 4)
Enter the market regardless of positions, and enter 10 lots at the closing price of K2. If you increase your position in the future market, the position will inevitably increase, and the risk and return will also increase. If you stop the profit and stop the loss to reduce the position, you can only lose all positions. Just very passive.
Split the order and enter the market. When K7 breaks through the resistance level 1, the rise continues, and the negative line of K8 pulls back, we can appropriately reduce the position, lock in part of the profit and reduce the risk of the position.
K9 and K10 are located near the support level 2, forming a bullish harami signal, we can re-enter the position that was reduced from the high position, and move the stop loss of all positions to the support level 1.
In the future market, K11 breaks through the resistance level 2, the upward trend continues, and a bearish signal appears. We take partial liquidation, and when there is an opportunity to increase the position in the market, we will take back the reduced position, that is, follow the law of price movement and use split orders to split The flexibility of the warehouse manages the position well, so as to control the risk.
Note that the above strategies such as the number of orders split, entry, increase and decrease, stop loss, and take profit, etc., please formulate and adjust according to your actual situation and specific market changes.
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