Remember one thing: all your actions are aimed at increasing the tolerance for your positions and reducing costs; holding positions is the ultimate goal.
99% of retail investors make the same mistake: they can't hold onto winning trades and stubbornly cling to losing ones. Let's first talk about not being able to hold onto winning trades. Many people have a mindset that says, 'Take profits when you can, secure your gains.' Fine, if you've decided this is your last speculative trade and after taking profits you vow never to enter this market again, then I support that. But if not, you are actually hoping to sell at the highest point each time, only to watch the price start to decline right after you sell, and then you try to buy back at the bottom, repeating this cycle. In fact, you are betting on a very low probability event. More often than not, after you sell, the market enters the next round of upward momentum, but you are no longer involved.
I have seen many newcomers who are always thinking about day trading, believing that day trading is the highest realm. They fantasize about becoming rich through futures contracts.
The scenario is as follows: when you want to make money, you go to the futures market to trade for a day. After making some profits, you feel secure and wait until you run out of money to go back to the futures market to make some more. However, ideals are often lush, while reality is stark, and you often miss out on many big market movements that could have achieved financial freedom in one go.
Incorrect profit-taking has caused them to miss out on significant market opportunities, while they often fail to stop-loss when making mistakes, stubbornly holding onto losing trades and even averaging down. This means they only make small profits when they are right, but suffer endless losses when they are wrong. If this doesn't lead to losing money, what will?
The gambler's theory of losing everything states that the amount lost in each failure is the same as the amount earned when winning. Meanwhile, you are losing endlessly while making tiny profits. Over time, it's a miracle if you don't lose everything.
So what is the correct approach? First, correct your mindset, and then build a scientific trading system. What is a scientific trading system? Many books on the market are wrong; they lead you down a dark path. For example, they say you need to have stop-loss discipline and execute like a machine. This is correct, but what is their stop-loss strategy? It is simply to set a stop-loss after losing a certain number of points. - This is a huge mistake! It has harmed many people. Why? You will understand after I explain the trading system I propose.
The real core of a trading system revolves around stop-loss points, where stop-loss points act as support levels. If you are shorting, the stop-loss point is the resistance level. If support or resistance is broken, you must stop loss. It is essential to have a stop-loss point first, then determine your position size based on how far it is from the stop-loss point.
Position sizing is a significant area of study and is the most critical aspect of a trading system. To make money in a bull market, you must strictly adhere to the trading system and not just rely on luck!