After strictly implementing the stop-loss during the transaction, how to deal with the problem of frequent stop-loss?
The appearance of frequent stop-loss can be roughly classified into three situations: first, the market does not cooperate; second, the opening position is inaccurate; third, there are problems with the setting of the stop-loss point. Below, we will analyze and discuss the solutions one by one.
First, let's talk about the market not cooperating. There is a saying that standing on the wind, even a pig can fly. Similarly, when the market matches your trading habits or trading system, as long as you strictly follow your own logic for opening and closing positions, profits will naturally come rolling in.
For example, if using a dual moving average system to operate, encountering a one-way trend market like the one below, as long as you strictly operate according to the principle of not breaking the moving average, no one can stop you from making a profit. Obviously, in this situation, if the moving average is used as the stop-loss line, there will be no frequent stop-loss. Whether it's a downtrend, a oscillating trend, or an uptrend, if operating within the range between the downtrend and the uptrend, it is obvious that the price fluctuates back and forth around the moving average. If you still set the stop-loss according to the moving average in this kind of market, you will inevitably experience frequent stop-loss. To sum it up in one sentence: you can win a horse race, but you cannot win every horse race.
For this situation, the solutions are relatively simple. One is to reduce the frequency of operations, and the other is to resist the oscillating market. My suggestion is to reduce the frequency of operations. It's better to miss than to make mistakes. Missing out only means earning less, but making mistakes may lead to being eliminated. For traders, only those who can afford to lose may become long-term winners.
Next is the issue of incorrect opening positions.
Seeing the direction is not a difficult problem for most people, the problem lies in the fact that seeing the direction does not necessarily mean making money. On the contrary, it is common to lose money even when the direction is correct. Just like placing an order, it requires the right timing, location, and people, and none can be lacking. Seeing the right direction is just taking advantage of the timing, but grasping the actual market situation is also crucial. For example, is it correct for everyone to open a long position at the point indicated by the arrow? Obviously, the direction is correct, but the timing is not right. Especially for those of us in the coin circle trading high-leverage contracts, if the position is heavy, at the two positions mentioned above, if the stop-loss is set according to the moving average, the likelihood of liquidation is high. If a small stop-loss is used to chase the rise, it is likely to end up with frequent stop-loss, even if the direction is correct. Many times, whether you can hold on is not just a psychological issue, but also a practical issue. Similarly, if you open a short position at these two points, even in such a strong one-way market, there is still nearly 200 points of profit potential, which is the grasp of timing. Of course, it is not recommended to go against the trend. Obviously, in this trend segment, except for these two adjustments, opening long positions most of the time is usually correct and less likely to be stopped out. From a probabilistic perspective, the opportunity to make money by going long is significantly greater than going short. This is why it is said that following the trend is king.
Finally, there is a problem with the setting of the stop-loss point.
This point is actually difficult to judge because stop-loss includes both objective and subjective factors. Objectively speaking, for trend traders, they should not leave the market as long as the trend is not broken. But subjectively, whether it is the retracement of profits or the ability to withstand losses, everyone's psychological and actual tolerance levels are different.
Let's look at this chart again. In what seems to be an extremely smooth market, the average daily fluctuation is about sixty points, with leverage of about ten times, and an average fluctuation of sixty points is roughly a 20% to 30% profit and loss fluctuation. Can you bear such a capital drawdown? Most people cannot bear it, so most people do not participate at the daily level. Therefore, it is difficult to judge right or wrong for stop-loss. Here, I will explain some personal opinions, hoping to be helpful to everyone.
Stop-loss is necessary, and frequent stop-loss is better than no stop-loss.
Do not set the stop-loss at too obvious a position.
Stop-loss is not only to control risk, but also to increase capital utilization. When going long, do not lower the stop-loss line, and when going short, do not raise the stop-loss line.
The triggering of the stop-loss does not mean that the trade is wrong, give yourself three chances to enter the market.
Be good at using trailing stop-loss to protect your profits.
The fundamental of trading is survival, and then comes the profit. So, before each operation, think clearly about whether your operation is reasonable and whether your capital is safe. Formulate your own trading ideas, continuously optimize and improve them. Although the advice of the coin circle academician may not make you rich overnight, it can ensure that you are always there. Only those who can survive in the coin circle for a long time and persist until the end will succeed. Good luck!
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