Take profit and stop loss, which is more crucial?
In the face of these two, investors often find themselves in a dilemma. Taking profit is a sweet burden; stopping loss is a painful choice. Those who advocate the so-called 'balance theory' often say both are equally important, but in reality, they speak superficially and lack depth.
In terms of short-term trading, I firmly believe that the importance of taking profit far exceeds that of stopping loss. This is not to encourage greed, nor to suggest holding onto profits stubbornly, but to emphasize the need to act swiftly after making a profit and to withdraw in a timely manner. As long as we act quickly, losses cannot catch up, and naturally, we won't have to hover between holding on and letting go.
The core of my strategy lies in: patiently waiting for a clear trend and steadily entering the market. After entering the market, I allow for small losses, because for mechanical trading, as long as it does not break the bottom line, fluctuations are acceptable. Once it breaks, I will stop loss immediately, without hesitation. However, when the market trend is established and profits begin to accumulate, I will closely monitor the earnings. Once it reaches the predetermined target or shows signs of profit withdrawal, I will immediately take profit. This practice may cause me to miss the peak, but it has allowed me to avoid countless instances of significant profit withdrawal, and I have never turned a profit into a loss. In other words, I sacrifice potential long-term and peak gains in exchange for stable fixed returns.
Confidence is gradually forged through practice. We should forget the fluctuations of short-term profits and losses, discard fantasies of getting rich quickly, and focus on improving trading success rates, rather than overly concentrating on the short-term fluctuations of assets. A high success rate can lead to high confidence, and high confidence can, in turn, maintain our high success rate, forming a virtuous cycle. Continuous losses can lead to psychological breakdown, loss of confidence, and ultimately result in ineffective trading decisions.
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