In contract investment trading, stop-loss is a normal and correct operation method, but the result of stop-loss is not always correct. Sometimes, when you execute the stop-loss operation according to your own principles, the result may be the opposite of what you expected. So, how should stop-loss be correctly viewed? Today, we will explain it in detail for everyone. This article is compiled by Teacher Duan Chenbei and is shared with the majority of investors who love learning.
What is stop-loss?
Stop-loss refers to closing a position and exiting in a timely manner when the loss of a certain investment reaches a predetermined amount, in order to avoid incurring larger losses. Its purpose is to limit losses to a smaller range when there is an investment mistake. In other words, stop-loss makes it possible to seek greater profits at a smaller cost.
How to properly handle stop-loss?
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I. View stop-loss with a calm mindset
Stop-loss is a technical means used in contract investment and is one of the main measures for risk management. There are two implications: first, your operation may have no errors in thinking or principles, but the execution results of anything are probabilistic and can never be 100% accurate; second, the establishment of stop-loss principles also needs continuous improvement, and different situations should have different response principles. Therefore, stop-loss itself is a very normal operation method, and regardless of the result, it should be strictly executed. What needs to be done must be done.
II. Execute stop-loss without hesitation
Usually, the stop-loss should be set before entering the market. Once the actual situation matches your stop-loss principle, it must be executed! At this point, regardless of whether your stop-loss principle is scientific and reasonable, resolute and decisive execution is the top priority. Investors must not have any luck or fantasies at the critical moment of stop-loss. When executing stop-loss, one should adhere to less thinking and more action. Overthinking often leads to missing the timing of stop-loss, weakening the determination to stop-loss, and making subjective erroneous decisions. True stop-loss is actually the execution of an objective decision, because the occurrence of a stop-loss signal is not something that investors come up with themselves, but a manifestation of objective facts. So, just firmly execute it.
III. Improve stop-loss thinking
Everyone knows that if stop-loss is done well, investors can avoid significant losses, but stop-loss itself cannot make you profitable. Therefore, if you want to be a successful investor, you should have a more thorough understanding of stop-loss. Regardless of whether the stop-loss is successful or not, it is in the past, and the next step of operation is the most important. You must adjust your mindset after stop-loss in a timely manner, because each specific stop-loss is not necessarily the same as expected. The establishment of stop-loss thinking and methods is always correct. Therefore, in order to ultimately profit and win, you must develop a more perfect and scientific investment operation plan after stop-loss, striving to do the right thing in the next step, thereby reducing the probability of stop-loss occurring again.
Stop-loss is far more important than profit, because preserving capital is always the top priority, while profit comes second. Once investors understand how to handle stop-loss correctly, they should cultivate good stop-loss habits to avoid risks in the market and minimize losses to the greatest extent, so as to stand undefeated in the contract investment market.
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By Duan Chenbei, contract analyst!
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