Lock-up Position vs. stop loss: The risk management strategies for retail investors in futures trading

In futures and contract trading, when retail investors face an incorrect position (for example, going long when the market is declining), they often tend to manage risk by opening an equal opposite position (i.e., hedging Lock-up Position). This operation can temporarily fix the gains and losses of the position, isolating the impact of price fluctuations. The following analysis discusses the reasons for retail investors to choose Lock-up Position, the practical significance of Lock-up Position, and the pros and cons of Lock-up Position compared to direct stop loss.

1. Why do retail investors prefer lock-up positions?

Retail investors choose lock-up positions, which is mainly due to the following considerations:

- Psychological aspect: Lock-up Position can avoid the psychological impact of immediately confirming losses, retaining the expectation that "the market may reverse," thereby alleviating anxiety.

- Strategic Level: In the face of volatile or short-term adjustment markets, if it is difficult to determine whether the trend has reversed, Lock-up Position can serve as a "waiting buffer" to wait for clear signals before taking action.

- Leverage market characteristics: In high-leverage scenarios such as cryptocurrency contracts, a Lock-up Position can reduce margin pressure and decrease the risk of liquidation;

- Flexible response scenarios: It can also be used to lock up profits, avoid overnight gap risks, or participate in short-term reversal trends.

The core significance of Lock-up Position

The essence of Lock-up Position is to "freeze" the current profit and loss, allowing the account to remain temporarily unaffected by price fluctuations, giving traders time to analyze the market or wait for the trend to recover.

- In a volatile market, a Lock-up Position can preserve the original position and unlock profits after the pullback ends;

- In a unilateral trend, you can participate in short-term reversal opportunities through Lock-up Position;

- It can also protect overnight positions, and unlock them in the direction of the trend after signals become clear (unlocking methods include closing profitable positions in a sideways market, increasing positions in the direction of the trend in a unidirectional market, etc.).

3. Conclusion

Lock-up Position is a short-term strategy used by experienced traders during volatile markets or to lock in profits, but retail investors are prone to emotional misuse, which can amplify risks. Stop loss emphasizes discipline and can protect the principal in the long term, making it more suitable for most retail investors. In practice, both can be combined to optimize strategies (e.g., setting a stop loss simultaneously after a lock-up position), but it is important to avoid emotional decision-making. Beginners are advised to practice with low positions and consult professional advisors to gradually establish a risk control system that suits them. #特朗普允许401(k)投资加密货币#