Position Management

No trader can achieve a 100% win rate,

If you rely on win rate to make money, then you should be a稳稳狗 (steady trader), requiring stability. For example, to seek stability, look at yesterday's trading framework; you might not even trade. If you don't trade, then you don't trade. Missing out is okay; there’s generally no market on weekends. Look at those few days of sharp declines; if you were using a steady strategy, wouldn't you have made significant profits? This is the win rate. The downside is that you might miss out on big trends.

If you rely on profit-to-loss ratio to make money, recognize when things are not right, protect your capital or take small losses, and then exit, but fully capitalize on big gains. Your win rate might be low, but how many times can you recover your losses with big gains? You will make money. You must not miss out on big trends, but the downside is that it will lower your win rate. Your position management and stop-loss must be well executed, and your mindset must be able to hold steady. (Many top traders use this method because pursuing profit-to-loss ratio means continually experimenting, which is much easier, whereas pursuing win rate is more challenging.)

Tolerance for errors in trading, as I just mentioned, it's nearly impossible for any trading framework for you to always be in profit, or for you to enter a trade and constantly be in floating profit without floating loss. The same applies to short positions. So, tolerance for errors must be managed through stop-losses. Let me give you an example: if you currently open a long position around 80,000. If your position management means you have no forced liquidation price, have you considered that your probability of reaching 100,000 with a win is almost 100%? Of course, I’m not saying everyone should do this.

This brings us to the concepts of full position and incremental position. Contracts must be traded with full positions. Stop-losses must be set. So why do I say that high profit-to-loss ratio strategies have a low win rate, yet you can still make money? If each small loss is managed as I previously discussed regarding position allocation, then each small stop-loss truly accounts for only about 1% of your entire position. What does this mean? If your entire position is 100u, you're only losing 1u on a stop-loss, but if this trade hits a big trend, you could potentially earn 10u.

Position management is included in the trading framework. Many people think that as long as they know the entry and exit points, they will definitely make money in the long term. That's not the case. For example, if I always advise to go long, and I always tell you that going long will win 100,000, then you would find that those who manage their positions well can actually earn 100% from good position management, while those who do it poorly might face liquidation in the middle. Therefore, do not let your chaotic position management affect your ability to make money.