1. Capital management must pass the test. With leverage from 0-100x, short-term losses are inevitable. The single trade risk should generally not exceed 2%-3%, while aggressive traders may go for 5%-8%. A risk level exceeding 8%-10% can lead to a 70% drawdown during unfavorable periods, and the average person's psychological breaking point is around 50%.
Strict execution of capital management is essential.
Many people like to trade with 5x or 10x leverage, operating on 4-hour charts or higher. The stop-loss on higher time frames is generally between 5% and 15%, with single trade risk levels.
Reaching 25% is equivalent to courting death. To ensure risk levels while maintaining high leverage, the time frame must be reduced to 1 hour, 15 minutes, or 5 minutes.
In smaller time frames, the number of skilled players decreases. Generally, 1-hour to 4-hour time frames are the limits for average players, while 5-15 minutes are manageable for professional traders; even professional traders struggle with 1-minute time frames.
2. The trading system must pass the test. Refining a trading system requires long-term trading experience accumulation. A successful adjustment is marked by not operating outside the defined conditions. In this process, continuous iteration is necessary, experiencing the baptism of bull and bear market fluctuations.
Due to leveraged trading and T+0, frequent trading requires preparation for 90%x9 in tuition fees. Many people start with hundreds of thousands, but it's important to understand one thing: no matter how much initial capital you have, it's only enough to pay tuition once, with 8 more rounds to follow.
Therefore, it's essential to trade with small capital; trading with hundreds or thousands is fine. Don't increase your capital just because you're making profits; withdraw profits and continue to trade with small amounts. At the beginning, both the system and operation won't be particularly proficient, and many mistakes and unnecessary actions are unavoidable.
Many posts talk about how much they've lost, but in my view, such losses are meaningless; it's just paying tuition once, without even touching the door. The learning curve hasn't improved, and it's no different from gambling.
3. Execution ability must pass the test. Similar to last year's '519' incident, betting in the wrong direction can lead to irreversible loss. All the earlier profits can be wiped out by just one similar mistake.
If you haven't survived a black swan event, it's equivalent to zero. Strict stop-loss rules are essential; most liquidation happens from counter-trend bottom fishing. Similar to the recent Luna situation, it was also a case of counter-trend bottom fishing leading to liquidation. Don't gamble on low-probability events, and don't expect to achieve everything in one go.
4. Accumulation of time and experience. In a bull and bear market, it's necessary to become familiar with the market characteristics of different stages and adjust strategies according to the market conditions.
Giving someone a rose leaves a lingering fragrance on your hands. Thank you for your likes, follows, and shares! I wish everyone achieves financial freedom soon!
