Trading Iron Law: Stop Loss is Survival, Holding Positions Leads to Destruction
In the highly volatile trading market, the choice between stop loss and holding positions is a matter of life and death for traders.
1. Stop Loss: Guarding Survival with Discipline
- Risk Control: A 30% drop in the crypto market in a single day is common; a 10% adverse fluctuation with 10x leverage means liquidation. Stop loss is using small losses to gain the qualification to stay in the market; for example, if BTC drops from 100,000 to 90,000, a 5% stop loss results in a loss of 5,000 USD, while holding the position to 80,000 would result in the principal going to zero.
- Emotional Management: Holding positions stems from wishful thinking, and losses exceeding 20% easily lead to the “sunk cost fallacy.” Data shows that the average loss for users who hold positions in the crypto market is 4.7 times that of stop loss users, with 90% of liquidations due to holding positions.
- Probability Advantage: Even if there is a rebound after a stop loss, statistically, it is still the correct operation. In 10 trades, there will be a drop after the stop loss in 6 instances and a rebound in 4; strict stop loss traders can have “6 small losses + 4 large gains,” while position holders are likely to collapse in a market crash.
2. Holding Positions: Battling the Market with Luck
- Leverage Crisis: Holding positions on contracts leads to a decrease in margin rate, triggering forced liquidation. For example, during the Israeli airstrike on June 13, 2025, ETH fell from 2,800 to 2,450 USD; with 10x leverage, not only was the principal lost, but an additional 15% was lost due to slippage.
- Opportunity Loss: Holding positions ties up capital and misses new market trends; for instance, while holding BTC at 100,000, ARB might soar by 50%. Data indicates that the annualized return for users who hold positions is 63% lower than that of stop loss users.
- System Collapse: One profitable holding position reinforces incorrect beliefs, and the “survivorship bias” can be fatal during a black swan event.
3. Three Rules for Executing Stop Loss
- Mechanical Stop Loss: Leave the market immediately if a single loss exceeds 5% of the account.
- Technical Stop Loss: Automatically trigger conditional orders when breaking key support levels (e.g., BTC 103,000, ETH 2,480).
- Emotional Stop Loss: If losses cause insomnia or anxiety, close the position immediately.
Trading is a probability game; stop loss is used to avoid catastrophic risks with controllable losses. In the crypto market, survival is more important than profit—those who strictly adhere to stop loss may experience short-term losses, while position holders will ultimately be eliminated by the market.
