I find that many retail investors are fond of risk during downturns but hate risk during uptrends. This is a common issue for the vast majority of people. To put it bluntly, when you were stuck and down 20, you felt bad, but you couldn’t bear to sell. You used to check the K-lines and prices several times a day, but when it drops more than 30, you become too lazy to check. You just lie flat, thinking that a significant pullback must lead to a significant rebound. You still firmly believe that if you just lie flat, one day you will be able to break even. You won't panic as much as you did when you were down 20.
However, one day when the asset you hold rises, and it increases by 10%, you will definitely be very happy. But if it rises by 20% in a short time, you start to panic. You can’t hold on anymore; you begin to hate risk. You fear losing a sure profit, and you really want to secure your gains, but you are also worried about missing out. This creates a strange phenomenon: when you are clearly making a profit, you panic even more than when you were down 50%. Finally, when it rises to 30, you start to doubt everything. You think such a high increase must come with a correction. Sure enough, when there is a small pullback the next day, you think you must exit. It’s foolish to wait any longer as it’s easy to lose everything, so you sell. Hahaha, (I’m talking about you; if you’ve had a similar experience, please leave a comment in the comment section). This is why the market always follows the 80/20 rule: because those who hold on during a loss are often the ones who panic and sell on a small gain. It’s always a cycle of big losses and small wins, so you can only be that “80” of losses, while those who truly learn and summarize their experiences become the “20.”
Let's get straight to the point. If you can't remember, just save it and read it a few more times. If you can remember, give it a thumbs up before you go.
The previous article mentioned position management. (New followers who haven't read it should go take a look; otherwise, you might not understand this course.) We continue discussing the stop-loss and take-profit ratio of position management. When should we stop-loss? From the moment you start a trade, you must have a clear stop-loss and take-profit level. This risk-reward ratio must always be greater than or equal to 2:1. If you set a take-profit at 10 but a stop-loss at -20, let me tell you, you are risking 20 to gain 10; you really need to rethink that. The expected profit target must at least withstand double or more the potential loss of this trade for it to be worth doing.
For example, when you plan to enter a position, if you want to take a profit of 20, then your stop-loss must be set at a total loss of 10 or below. Here comes the key point: you can set two stop-loss levels. Taking a profit target of 20 as an example, your first stop-loss can be set at -5. Once it hits the first stop-loss level, decisively cut your position in half. The second stop-loss should be calculated based on the price after you have halved your position. If it drops another 7, quickly exit the remaining half position, don't hesitate. Don't think that just because there’s a big drop today and it hit your first stop-loss level, you can't bear to sell. You might think tomorrow it will rebound, so you can lose less. But I’ll tell you a harsh reality: the market has its own rules and will not develop according to your expectations. Holding onto the fantasy of a rebound, not exiting when you're at a small loss, leads to many examples of being stuck when the price is halved.
So everyone should not hold onto fantasies. The hardest part of trading is not when to buy, but overcoming human greed and fear. Buying well does not make you a master; knowing when to sell is the key to whether you can survive in this circle in the long term. Why do many retail investors lose money in bull markets? Clearly, the price is rising, how can you lose money? It's human nature. That's why I always strictly require the retail investors in the group to treat themselves as a robot that strictly executes preset commands without emotions from the moment they enter a position.
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