Which is more critical, stop-profit or stop-loss?
Investors often get tangled up in the face of these two. Stop-profit is a sweet burden; stop-loss is a painful choice. Those who advocate the so-called "balance theory" often say that both are equally important, but in fact they are general and lack depth.
As far as short-term operations are concerned, I firmly believe that the importance of stop-profit far exceeds that of stop-loss. This is not to encourage greed, nor is it a suggestion to hold on to profits, but to emphasize quick action and timely withdrawal after making profits. As long as we act quickly, losses will not be caught up, and naturally there is no need to hesitate between holding on and giving up.
The core of my strategy is: patiently wait for the trend to be clear and enter the market steadily. After entering the market, I allow small losses, because for mechanized trading, as long as the bottom line is not broken, fluctuations are acceptable. Once a breakthrough is made, stop loss immediately without hesitation. However, when the market trend is established and profits begin to accumulate, I will keep a close eye on the gains. Once the predetermined target is reached or the gains show signs of retreat, I will immediately stop profit. This approach may have made me miss the top of the mountain, but it allowed me to avoid countless large profit drawdowns, and I never had a profit-turned-loss situation. In other words, I sacrificed the long-term and potential gains at the top of the mountain in exchange for stable fixed income.
Self-confidence is gradually built in practice. We should forget the fluctuations of short-term gains and losses, abandon the fantasy of getting rich quickly, and focus on improving the winning rate of transactions, rather than paying too much attention to the short-term fluctuations of assets. A high winning rate can bring high confidence, and high confidence can in turn maintain our high winning rate, forming a virtuous circle. Continuous losses will lead to psychological collapse, loss of confidence, and ultimately make invalid trading decisions.
