1. Should an automatic stop-loss be set?
When engaging in short-term trading, we usually formulate a stop-loss plan in advance when opening a position. So, is it necessary to set an automatic stop-loss in advance? My answer is that it is essential to set an automatic stop-loss. In the process of trading, people are easily influenced by subjective consciousness. As the trading amount fluctuates, the inner human weaknesses will be activated, making it difficult to execute the stop-loss as planned. Setting up an automatic stop-loss not only addresses these psychological issues but also prevents problems such as not being able to react quickly when the market moves rapidly or not being at the computer when a stop-loss should be executed. Automatic stop-losses also help us develop good trading habits. Therefore, it is crucial to set an automatic stop-loss when engaging in short-term trading.
2. Where should the stop-loss line be placed?
Every trader has different trading strategies, and stop-losses are part of those strategies, varying from person to person. However, one sentence can summarize the common point of stop-loss strategies — execute a stop-loss when the basis of your trading strategy is no longer tenable. Here, I will provide an example from my own experience. I am a trend-following trader, and when the price pulls back too deeply, especially with significant trading volume, the market trend is often difficult to sustain. At this time, I witness the automatic stop-loss at the pre-set stop-loss price. This judgment is usually also based on support levels, the larger environment, and other factors. In short, when the market logic you rely on undergoes a fundamental change, it is time to execute the stop-loss.
3. How to set the stop-loss amount?
Some people set their stop-loss positions based on the amount of loss they can tolerate when trading. For example, "If I lose over 100, I will stop trading." This is actually a wrong approach. The setting of a stop-loss must first consider the logical conditions mentioned in the second point. Our way of adjusting the stop-loss amount should be achieved by adjusting the number of contracts when opening a position. When determining the stop-loss amount, there are two main factors to consider: first is the account tolerance rate, and second is the psychological tolerance rate. The account tolerance rate refers to the inability to incur irreparable results due to occasional failures, for example, losing 30% of the account in one go is definitely undesirable. The psychological tolerance rate refers to not letting a single trade failure affect the next trade. The role of a stop-loss is not only to protect your account balance; more often, it protects your mindset.
Stop-loss is an event that every trader must face, and it is one of the most fundamental introductory topics for becoming a trader. However, while everyone focuses on making money, they often overlook stop-losses, subconsciously avoiding this seemingly unpleasant topic. In the upcoming period, I will consciously update some content related to stop-losses, hoping everyone can remain dignified and guilt-free even in the face of losses. #非农就业数据来袭 #BTC重返11万 #币安Alpha上新 #合约交易 #ETH $BTC $ETH
