Many traders underestimate the importance of position size and exit decisions, resulting in excessive risk for each trade. This bias is actually very subtle and easily overlooked by many traders. Proper position management determines the execution efficiency of the trading system, and the execution efficiency of the trading system in turn determines the final performance of live trading.
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Traders are also human; as long as they are human, they will have emotions and will inevitably be affected by emotions to some extent. This is unavoidable for anyone.
For example, let's consider two traders, A and B, both starting with 200,000 yuan, using the same historically tested and comparably successful system, trading the same instruments and for the same duration. Imagine, under almost identical conditions, will their final performance be similar? Not necessarily, and there may be a significant gap.
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Why is that? Because their position management approaches are different.
Although both have 200,000 yuan, it means something different for A and B. For A, 200,000 yuan is half of his total assets, while for B, it may be less than one-tenth. Therefore, the pressure on the two is completely different; A experiences immense pressure compared to B and is very fearful of the arrival of a losing period. If a losing period occurs, A's execution efficiency will face a significant test, while B is relatively much more relaxed because there are more assets behind the 200,000 yuan, whereas A is pushed to a position where he cannot afford to lose.
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Through this example, I want to emphasize that factors outside of trading are very important as they can directly or indirectly affect the trader's psychological state because traders are human.