Specific handling strategies
1. Hitting preset stop-loss: Close positions immediately.
* Optimal situation: ** You have set a stop-loss in advance and strictly executed it. Losses are controlled within the predetermined range. Accept this loss as part of trading costs.
* Action: ** Close positions, review reasons (is it a strategy issue, execution issue, or abnormal market fluctuation?), adjust and re-engage.
2. No stop-loss/poor stop-loss level, already producing significant unrealized losses:
* Calm assessment (quick): **
* Reasons: ** Is the loss due to incorrect entry point, direction judgment, sudden news (such as policies, reports, black swan events) or normal fluctuations?
* Current trend: ** Has the price clearly broken through key support/resistance levels? Has the trend reversed?
* Account risk: ** What proportion does the current unrealized loss account for the total account funds? Is it close to the forced liquidation line? What is the pressure for additional margin?
* Subsequent potential (objective!): ** Is there strong and objective evidence (not subjective expectation) that indicates the price will quickly reverse to profit?
* Action choices: **
* Immediate stop-loss (preferred): ** If the judgment is wrong or the trend is clearly unfavorable, **no matter how large the loss, close positions immediately**. Acknowledge mistakes, preserve remaining funds. As long as you have the green hills, you don’t fear not having firewood.
* Partial liquidation: ** If an overly heavy position is the main problem, first close part of the position to reduce overall risk exposure and margin pressure, then observe the performance of the remaining position.
* Strategic retreat (caution!): **Consider only under **extremely strict** conditions:**
* You have clear, stronger support/resistance levels as new, closer stop-loss levels.
* Unrealized losses are still within controllable range (not affecting core capital).
* There are very strong technical or fundamental signals indicating a reversal is imminent.
* Must set a new, stricter stop-loss immediately! **
3. Encountering 'black swan' events or extreme volatility:
* Priority is survival: ** When there is liquidity exhaustion, gap openings, or consecutive ups and downs in the market, the primary goal is to close positions as quickly as possible (even if the price is poor).
* Utilize exchange rules: ** Understand the exchange's handling of abnormal situations, forced liquidation rules, etc.
* Post-event review: ** Such events often exceed normal risk control ranges, focus should be on how to prevent such extreme risks through diversification and reducing leverage.
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### Absolutely prohibited behaviors
1. Locking positions (long and short):
* On the surface, 'locked in' losses, but in reality:
* Occupies double margin, reducing capital efficiency.
* Generates double fees.
* Unlocking is extremely difficult, often facing attacks from both sides, leading to larger losses.
* Cannot resolve the fundamental issue, just delaying and increasing costs.
2. Ostrich mentality, neglecting: Hoping the market will come back by itself may lead to forced liquidation or unlimited loss expansion.
3. Revenge trading: Emotional loss control after a loss, eager to recover, heavy trading, frequent transactions, often leading to larger losses.
4. Blindly trusting others' 'advice' to hold positions: Take responsibility for your own trades.
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### How to prevent losses from expanding (pre-risk control)
1. Light position trading: Control the risk (stop-loss amount) of a single trade within 1%-2% of the total funds. This is the cornerstone of survival and long-term profitability.
2. Leverage management: Understand and respect leverage. The higher the leverage, the higher the requirements for stop-loss precision and position control.
3. Diversification: Spread across different varieties or markets with lower correlation to avoid excessive risk from a single position.
4. Trading plan: Each trade must have a clear plan, including entry reasons, target levels, stop-loss levels, and position size. Strictly execute after opening positions.
5. Continuous learning and review: Analyze the reasons for each losing trade, is it a systematic problem or an execution issue? Continuously improve strategies and discipline.
6. Mindset management: Accepting losses is part of trading. Successful traders seek long-term probabilistic advantages, not winning every trade. Stay calm and objective.
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Summarize key steps
1. Immediate assessment: Current unrealized loss, account risk level, reasons for loss, market conditions.
2. Execution discipline:
Have preset stop-loss: Execute *resolutely upon hitting**.
No stop-loss/poor stop-loss: *Prioritize immediate stop-loss**. Only consider adjusting the stop-loss level (narrowing the loss range) under extremely strict conditions.
3. Absolutely forbidden: Averaging down, locking positions, neglecting, revenge trading.
4. After exiting: Review and summarize, adjust strategy/discipline, **consider the next trade only after calming down.**
Remember: Successful trading is not about capturing every profit, but decisively cutting every loss. Protecting capital is always the top priority; opportunities are always there, but the premise is that you still have capital to participate. When facing losing trades, decisive action is often wiser than waiting for 'hope.'
