Popular Science in the Currency Circle: An article introducing what it means to cover a position

Cover-up refers to the operation of adding funds to buy or sell contracts or stocks in the same direction when a position loses or makes a profit in the financial market. The main purpose of covering a position is to make up for losses, expand profits or control risks. It can be divided into simultaneous cover-up or reverse cover-up. Investors need to pay attention to risk control, reasonable allocation of funds, and consideration of costs and market trends to improve the success rate of cover-up.

What is margin call?

Covering a position means that in financial markets such as futures or stocks, when an investor's position suffers a loss, in order to make up for the loss or expand profits, additional funds are added to buy or sell contracts or stocks in the same direction. .

Why should we cover our positions?

The main purpose of covering up a position is:

• To make up for losses: When a position suffers a loss, it can smooth out costs and reduce the extent of losses by covering up positions.
• Expand profits: When a position becomes profitable, you can expand your profit margin by covering up your position.
• Control risks: Covering positions can help investors control risks, disperse the concentration of positions, and prevent large losses in a single position.

Types of margin call

Margin margin can be divided into two types:

• Same direction margin margin: Cover-up position in the same direction as the original position, that is, when the original position is a long order, the cover-up position is also a long order; when the original position is a short order, the cover-up position is also a short order.
• Reverse cover-up: Cover-up in the opposite direction to the original position, that is, when the original position is a long order, the cover-up is a short order; when the original position is a short order, the cover-up is Long order.

Things to note when covering positions

You need to pay attention to the following when covering positions:

• Risk control: Clarify the risk tolerance of covering positions to avoid exacerbating losses by over covering positions.
• Fund Management: Reasonably allocate replenishment funds to avoid investing too large a sum at one time.
• Holding cost: Consider the cost of covering the position to ensure that the holding cost after covering the position is in line with expectations.
• Market Trend: Judge the market trend and follow the trend to cover positions to increase the probability of profit.

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