In contract trading, applying zero-sum thinking fundamentally involves developing an awareness of the opposing side: every dollar you earn comes from your opponent’s loss; every dollar you lose becomes someone else’s profit. Based on this logic, the strategies of taking profits and cutting losses are not just mathematical issues but also psychological games and capital management concerns.

With zero-sum thinking, you can optimize your strategies from the following perspectives:

1. Taking Profits: Don’t Expect to Eat the Last Penny

In a zero-sum game, when the price reaches an extreme, the opposing side will collapse. Your take-profit point should be set before the opposing side’s collective margin call or surrender.

· Find “Leverage Liquidation Clusters”
Use tools (like Coinglass’s liquidation heatmap) to observe. If the price approaches a point where many short positions are liquidated, these shorts will turn into buy orders, pushing the price up. But as a long, don’t wait until all shorts are wiped out. Once the last straw breaks, the strong buying momentum will vanish, and the price may fall back quickly. Right-side traders can take profits as the liquidation accelerates, while left-side traders should exit early before a large number of liquidations occur.
· Watch for “Opponents’ Desperation”
When market sentiment is extremely unanimous, such as the community collectively shouting “kill the bears,” it indicates that the potential bullish force has been exhausted. In a zero-sum game, when all opposing positions are wiped out, your profit source disappears. At this point, even if technical indicators haven’t peaked, consider taking profits.

2. Cutting Losses: Your Bottom Line Is the Opponent’s Feast

In zero-sum games, stop-losses must be set before the opposing side believes you are “sure to die.”

· Beware of “Liquidity Hunting”
Large funds (main players) often target retail traders’ stop-loss orders. Suppose everyone places their stop-loss at $58,000; the main players might deliberately push the price down to $57,900, trigger your stop-loss, then bring the price back up. Your loss becomes their profit.
· Strategy: Don’t place stop-losses at round numbers (like $60,000) or obvious support levels. Instead, position them slightly away from the crowd, such as at $57,888, to avoid dense trading zones.
· Avoid Holding the Position
Zero-sum trading involves high leverage; holding through adverse moves not only loses money but also incurs funding fees. Your losses are someone else’s gains. The longer you hold, the more your opponent profits. Set a time-based stop-loss: if the price moves against your expectation within half an hour, it indicates your judgment might be wrong—exit and observe.

3. Entry Points: Seek Asymmetric “Opponent’s Advantage”

Before entering, ask yourself: Whose money am I trying to make?

· Profit from “Liquidation Orders”
If the price is at a certain level, just a 1% move could trigger a cascade of liquidations. This level is an excellent entry point because the price may be magnetically pulled toward it. You can place orders at a safe distance to capitalize on the accelerated move caused by liquidations.
· Profit from “Stop-Loss Orders”
When the price breaks below a consolidation zone, observe the volume. If the decline is accompanied by huge volume (many people cutting losses), it might be the last dip. Since the opposing side is exhausted and selling pressure is depleted, entering at this point means your opponents are those who are liquidating their positions.

4. Example of a Comprehensive Strategy

Suppose you are a day trader with a bullish bias. Using zero-sum thinking, you might plan as follows:

1. Analyze the opposing side: identify a large number of shorts at 1% below, and a large number of longs trapped at 0.5% above (potential selling pressure).
2. Entry: if the price drops into the dense short zone, then quickly recovers after a false breakout, go long (aiming to profit from short liquidations).
3. Stop-loss: place it slightly below the dense short zone (to prevent being swept out by a spike).
4. Take profits: exit in stages before the price reaches the long-trapped zone above. Because once you take profit, it may trigger those longs to sell to cover, and if profits aren’t realized, the price could be pushed back down.

In summary, applying zero-sum thinking means constantly reminding yourself: the market is brutal, and your profits depend on your opponents making mistakes. You need to spot their errors earlier than they do and seize profits before they correct their mistakes.