Mu Zhou stared at the green numbers dancing on the screen, his knuckles white from the strain. It was his third month in the market, and his account balance had been halved, yet he still couldn't figure out what went wrong.
"Going all in will quickly recoup your losses," he had scoffed at Old Chen's attempts to dissuade him. He'd just doubled his profits on a certain hot stock and thought position management was just an excuse for cowards. It wasn't until that stock suddenly suffered a downturn, pinning him to the limit for five consecutive days, that he understood what Old Chen meant by "going too fast will cause a crash."
What he regretted most was his first stop-loss opportunity. When the stock price fell three points below his cost line, the system prompted a preset stop-loss alert, but for some reason he clicked cancel. "Wait a little longer, it's bound to rebound." This thought clung to his sanity like a vine, and only when his losses reached thirty points did he, in despair, cut his losses. Later, Old Chen pointed to the candlestick chart and told him, "That day's stop-loss was like dropping anchor before a ship hits a reef. Losing a little anchor chain is better than sinking."
The trigger for his margin call was leverage. After his account dwindled, Mu Zhou increased his leverage fivefold in an attempt to turn things around. Initially, his implied profits ecstatic, until a late-night black swan event struck, sending the market crashing through his stop-loss line. He watched his account wiped out before his eyes, realizing that leverage isn't an accelerator, but a race car without brakes: it can take you far, but it can also send you careening off a cliff.
"Look at this cup of tea." Old Chen only filled it about 70% full, saying, "Leave 30% headroom so it doesn't burn." Mu Zhou suddenly understood that position management isn't about restricting yourself, but about giving yourself room to maneuver; stopping losses aren't about admitting defeat, but about putting a limit on risk; leverage itself isn't wrong, but he forgot that it can magnify both gains and greed.
Now, Mu Zhou's account no longer experiences wild fluctuations. He used a 20% position with 3x leverage, adjusting his position like a seasoned driver controlling his car's speed, setting a stop-loss for each trade. When the market suddenly shifted again, he calmly executed his stop-loss. Seeing his losses stay within his plan, he suddenly realized: The most important thing to defeat in trading is never the market, but yourself, the one who always wants to take a gamble.
