Six fatal mistakes in setting stop-profit and stop-loss

1. Mistakenly believe that you can recover your investment once after losing ten times.

The truth is: the more you lose, the harder it is to make your money back.

The essence of a contract is to win more and lose less, to earn more and lose less.

For example: if you trade 10 times, each time with a capital of 10,000 yuan, get 7 correct and 3 wrong, you can make continuous profits.

Win more often and lose less often.

The more you earn, the better; the less you lose, the better; this is the goal pursued by technical analysis.

2. Mistakenly believe that the opening point is not important, and the closing point is the key to profit and loss.

The truth is: no matter how good the position is, you still can’t make money if the order opening point is not good.

The essence of a contract is to pursue precise entry and exit points to minimize risks and maximize returns.

For example: Buy Bitcoin at 3700 and sell at 3800. If the position is small, you can't make money. If the position is large, there will be slippage, so you won't make money in the end. If you wait patiently until 2900 points to enter the market, will there be a good profit margin?

3. Mistakenly believe that by setting a stop loss, you can open an order against the trend with the support pressure.

The truth is: a good trader always goes with the flow.

The essence of a contract is not to be an absolute long or short position, but to be a sly person and always know how to stand in the minority.

Although some veteran hunters often use this method to make some short-term profits, the risk-reward ratio of this method is not attractive. Moreover, it requires veteran hunters to have very rich experience and skilled skills.

If you are really an experienced hunter, would you still open an order against the trend?

For example: Remember how many air forces were buried under the heavy pressure of 6,000 points on the Bitcoin at the beginning of 2019?

4. Misunderstanding that take profit and stop loss are the core of the trading system.

The truth is, take profit and stop loss are just components of an excellent trading system, and technical analysis is the soul.

The essence of a contract is to use stop-profit and stop-loss to prevent the occurrence of low-probability events, thereby using probabilistic thinking to make continuous and stable profits.

However, most people often know nothing about technical analysis, or have been using wrong trading methods. The key is that they are not aware of it, which is the most terrifying thing.

Many people think they understand the technology after learning a little bit of it, and can brazenly judge the effectiveness of the technology.

This is not rigorous enough. If we want to judge something, we must at least understand it thoroughly before we can make a judgment.

It's like pointing at the waves in the ocean and saying, this is technology. The waves are only a few meters above the surface of the ocean, while the deepest part of the ocean is more than 10,000 meters. The deep layer without any waves is the main body of the ocean.

5. Mistakingly believing that setting a stop loss is safe.

The truth is: little do you know that unreasonable stop loss settings or wrong entry points will cause you to stop losses frequently.

The essence of a contract is to set a stop loss at the most certain trading opportunity, providing the final layer of risk control for your own judgment.

If you frequently stop losses, what you need to do is reset yourself, re-examine your trading system, and rebuild it from scratch.

6. Misunderstanding that stop loss is harmful because losses come after stop loss.

The truth is: stop loss must be set, and we cannot doubt the methodology because of our own errors in use.

The nature of contracts is that the market will always be unexpected. If you think stop loss is harmful and do not set a stop loss or often fail to execute it, even if you escape 99 times, there will always be one time that will make you miserable.

For example, if you cut your finger while cutting vegetables with a knife, can you say it is the knife's fault? It must be your own method. When you cut vegetables frequently, you will gradually sum up the skills of cutting vegetables well, quickly, and without cutting your fingers. This is exactly the same as trading.

When you don't know how to cut vegetables, shouldn't you find a chef to teach you? Otherwise, you can only use your fingers to verify your judgment, and it's your own fault if you get bruised all over.