Stop-loss is the core of risk control and the key to success or failure.

Volatility and unpredictability are the most fundamental characteristics of the market, which is the basis of the market's existence and the cause of risk in trading. This is an unchangeable feature. In order to avoid being trapped and to avoid deep traps, every trader must understand stop-loss. This article will tell you how to set stop-loss and what methods there are for stop-loss.

I. What is stop-loss:

Stop-loss refers to cutting positions and exiting in a timely manner when the loss of a certain investment reaches a predetermined amount, in order to avoid larger losses. Its purpose is to limit losses to a smaller range when investment mistakes occur.

II. What are the methods of stop-loss:

1. Trendline stop-loss method: This is a stop-loss method that most new and old coin traders should be familiar with. When a coin is in an uptrend, connect two bottoms to form a trendline (not all bottoms directly form a trendline). If the coin price falls below the trendline, then stop-loss and exit, otherwise hold all the way. In trendline stop-loss, you can also draw two parallel trendlines to form a channel. If the coin price moves within the channel, you can hold the coin with confidence. Once it falls below the lower channel, stop-loss immediately.

2. Fixed stop-loss method: When a coin falls below the price at which you bought it, you directly stop-loss and exit. Many people set it at 10%, while some short-term traders set it at 5%.

3. Gann stop-loss method: Gann suggested in his book that the stop-loss level should be set at the resistance level below the purchase price. For example, for Ethereum, the usual stop-loss level is 10 points. If the trend is correct, it moves upward, up to the highest price or 5 points below the closing price.

4. Moving average stop-loss method: Depending on the different operating periods (short-term, medium-term, long-term), the stop-loss level can be placed below the 5-day moving average, 20-day moving average, or 120-day moving average. Once it falls below the moving average, leave immediately.

5. Candlestick pattern stop-loss method: Once the coin price falls below the neckline of patterns such as M-top, head and shoulders, flag, triangle, arc, etc., stop-loss immediately.

6. Capital stop-loss method: Large fund traders often establish a capital curve chart, calculating the market value based on the closing price every day, week, and month, and then drawing the curve with the account balance. When the curve is upward, it indicates that your trading status is good; when the curve is oscillating, you should reduce the frequency of trading and operate cautiously; when the curve is downward, reduce or empty positions and wait for the opportunity.

7. Fundamental stop-loss: Once a major bearish news about a coin price appears, traders should not look at any technical indicators at this time, should not have any illusions, and should leave immediately.

III. Misconceptions about stop-loss

The importance of stop-loss is understood by everyone, but it is not enough to set a stop-loss level arbitrarily. If you are lucky, your stop-loss will reduce your losses, but if you are unlucky, your stop-loss will not improve your account, it will only make things worse and undermine your confidence.

Misconception 1: Not setting stop-loss

In any operation, there will be right and wrong. If you do it right, everyone is happy, but what if you do it wrong? The only choice in the financial market after making a mistake is to immediately admit the mistake and stop the mistake, and stop-loss is the means to admit and stop the mistake. If you don't stop the mistake, small losses will turn into big losses, and eventually deep traps.

Misconception 2: Chaotic stop-loss

Many traders, after falling into deep traps without setting stop-loss, will generally realize the need for stop-loss and then fall into the misconception of chaotic stop-loss. After chaotic stop-loss, they will see their account getting thinner and thinner, and often return to the old path of not setting stop-loss.

Misconception 3: Sometimes setting stop-loss, sometimes not

After not setting stop-loss and chaotic stop-loss, investors will fall into the third misconception: sometimes setting stop-loss, sometimes not. When the loss is within their acceptable range, for example, they will stop-loss when they lose 10 points, but once the loss becomes larger, reaching 40 or 50 points, they will not stop-loss and just leave it there without looking. When a new wave of market trends comes, they will start paying attention again, calculating when to exit all day long…

One thing to note here: Every time after setting stop-loss, the coin price will continue to fall, even if the coin price rises sharply after setting stop-loss. You should face your choices calmly, not avoid them, and certainly not regret them. Stop-loss is a cost, a cost of finding profit opportunities, a cost that must be paid for trading profits. If you want to profit, you have to pay the price, including the cost of the coin price continuing to rise after stop-loss.

The above explains the methods of stop-loss and misconceptions about stop-loss. In your daily operations, continuously summarize and accumulate your own stop-loss methods, and strictly execute them. Only then can you walk more steadily in this market!

Duan Chenbei's message: Teamwork is always easier than working hard on your own. If you win, I will accompany you to dominate the world; if you lose, I will accompany you to rise again!

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