Evening Thoughts on December 24

In contract trading, liquidation is like a nightmare, especially for new investors. Due to inadequate risk management, a small mistake can lead to dire consequences. Some investors ignore risks and frequently face liquidation until their principal is depleted, which is quite lamentable. So, how can one prevent liquidation in contract trading?

First, manage position sizes reasonably. The key to trading profits lies in compound interest accumulation, not in exorbitant profits. The compound interest model varies from person to person and needs to be explored in practice. Remember this phrase: 'Start with a light position and operate in accordance with the trend; accumulate bit by bit, and grains of sand will form a tower.'

Second, always have stop-loss measures in place. The stop-loss level should be adjusted flexibly according to the position and trading cycle. For medium-term operations, the stop-loss can be moderately relaxed to around 2000 points; for short-term operations, it should be controlled to around 500 points. Divide the capital into three parts: one for trial trades and two for timely scaling up. Operate with small funds in short-term trades, avoiding holding positions blindly, while simultaneously considering both technical stop-losses and capital stop-losses.

Third, avoid frequent trading. If there are three consecutive mistakes, be sure to pause trading and change your mindset. You can read interviews and biographies of trading masters, and once your mindset has calmed down and frustration has dissipated, review charts and analyze the root causes of your mistakes, making small trial trades. If things are still not going well, continue to adjust your strategy.

Fourth, only go with the trend for long-term success. The market fluctuates unpredictably, and short squeezes often leave investors with nothing. The reason lies in stubbornness, increasing positions against the trend, and fantasizing about price reversals. Little do they know, the market is unpredictable; only those who adapt flexibly to the trend can survive. Investors need to continuously learn and practice, improving their technical analysis and psychological qualities, striving for unity of knowledge and action.

Fifth, never blindly follow trends. Before placing orders, carefully analyze the logic behind others' operations, exploring the basis for long and short positions and the reasons for opening and stop-loss orders, comparing them with your own judgments. If you find your analysis contradicts market trends, do not blindly follow; decisively withdraw.

In summary, risk and reward coexist in contract trading. Investors must adhere to their own views, act in accordance with the trend, and adapt flexibly to stay away from liquidation risks and gain control over trading situations.
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