Don't delay in cutting losses, cut when you're at a loss! Protecting your principal is the only hope for a comeback.
In the cryptocurrency world, 90% of losses come from the unwillingness to cut losses.
Many people fixate on small losses, thinking 'it will come back around',
but the losses keep snowballing until they encounter a margin call and exit the market.
Cutting losses is not about losing money; it is a crucial skill for protecting your principal!
Why is it essential to cut losses?
1️⃣ Control the range of losses to prevent a single correction from wiping out your account.
2️⃣ Maintain the vitality of your funds, allowing for the chance to make a comeback.
3️⃣ Prevent emotional trading and avoid a gambler's mentality.
How to set stop-loss scientifically?
Before trading, first determine your entry point and stop-loss point, with the stop-loss typically set a few points below support/resistance levels.
Set a reasonable loss limit based on position size and account capacity (e.g., 3% - 5%).
Firmly execute the stop-loss plan without hesitation or delay.
Typical lessons from stop-loss failures:
I once had a follower who opened a position without setting a stop-loss. As the market reversed, he let the losses run,
losing hundreds of US dollars and eventually thousands, leading to a margin call.
He said at the time: 'I was just betting it would come back, but the more I gambled, the more I lost, and in the end, I lost my principal and my mindset.'
This is a classic consequence of a gambler's mentality.
Losses are not scary; what's scary is the unwillingness to cut losses, which leads to unlimited magnification of losses.
Cutting losses is the defense line for protecting your principal. By safeguarding your principal, you have the chance to turn the tables.
