In traditional thinking, many people mistakenly believe trading (financial trading) is like playing the lottery: "Guess right to win big, wrong to lose everything." In reality, the market is always in constant flux and no one can predict price movements absolutely. Therefore:
Risk management is the key to protecting capital.
Profit Maximization is what helps your strategy generate sustainable profits.
Therefore, professional traders always equip themselves with a clear process, not just 'choosing which way to go up or down'.
Risk Management: Minimizing Losses in Unfavorable Situations
Determine maximum loss (Max Drawdown): Before entering a trade, you need to know what percentage of your account you are willing to lose if the prediction is wrong. Typically, this figure falls within the range of 1-2% of capital for each trade.
Use stop-loss orders: Set a Stop-Loss right when opening a position to automatically cut losses, avoiding the mentality of 'trying to recover' that leads to larger losses.
Diversify the portfolio: Don’t 'put all your eggs in one basket' – allocate capital across various asset types and markets to reduce systemic risk.
Risk-Reward Ratio: Choose trade setups with a ratio of at least 1:2 or 1:3 – meaning the potential profit is 2-3 times the acceptable loss.
"Only when you protect your principal can you truly have the opportunity to survive and thrive in the market."
Maximize Profit: Exploit the Right Timing
Identify the main trend: Go with the big waves, don’t 'swim against the current'. When the trend is clear, going against it is when you are easily drawn into mistakes.
Use take-profit orders wisely: Don’t wait greedily until the price reverses; set profit targets based on resistance/support, Fibonacci, or technical indicators.
Scaling In/Out: With strong signals, you can break down orders, add more when the price moves in the right direction, and partially close when reaching expected milestones.
Use controlled leverage: Leverage helps amplify profits, but also increases risk. Only use moderate leverage and always combine it with Stop-Loss.
"When you are on the right trend, don’t hesitate to maximize profits, but have a clear plan."
Three 'Golden' Keys: Patience – Discipline – Steady Mindset
Patience: The market has hundreds of opportunities each day, but only a few truly quality opportunities.
Discipline: Establish rules for entering/exiting trades, managing capital, and strictly adhering to them; violating discipline is akin to suicide in trading.
Steady mindset: Win without arrogance, lose without discouragement; stay calm to make wise decisions.
Conclusion
Trading is not simply a test of guessing 'Right-Wrong', but the art of balancing risk management and maximizing profit. Long-term winners are not those with the highest prediction rates, but those who best protect their capital when wrong and know how to fully exploit opportunities when right. Patience, discipline, and a steady mindset are the three keys that open the door to success on the investment path. Wishing you soon master the art of trading and reap the rewards you deserve.