Most people who play contracts have experienced liquidation. I believe most people have experienced the feeling of going from excitement to paralysis.
Let's talk about stop loss first: if you don't know how to stop loss, it is impossible to make stable profits!
There are only three reasons for our liquidation: first, high leverage, second, holding orders, and third, playing copycats and being pierced. Now that we know the reasons, we can prescribe the right medicine.
1. High leverage: In fact, many people start with very low leverage, but after experiencing several consecutive losses, they want to quickly recover their capital through high leverage, or after consecutive losses, their funds shrink rapidly, and they feel that normal leverage is hopeless to recover their capital, but high leverage fluctuations in minutes may lead to liquidation.
2. Holding orders: A common problem for most players, they will hold on to their losses and refuse to admit defeat, and even continue to add margin until there is nothing left to add. This kind of liquidation is the most uncomfortable, and they will lose everything directly.
3. Playing the copycat: I think that Bitcoin has low volatility, and I want to quickly gain profits or quickly recover my capital through the copycat with high volatility. However, many copycat dealers have serious control, and they will go up and down from time to time. No matter whether you are long or short, small leverage or large leverage will explode.
So: My stop loss strategy is to stop loss when the account is blown up! Since there is a probability of a blow-up, why don’t I stop loss directly with a blow-up?
Of course, my stop loss for a blow-up is quantitative based on loss. Generally, I can accept a loss of 1/20 of the funds, so I will use 1/20 of the funds to open a position. The stop loss line is this 1/20 of the funds. The leverage multiples can be 5 times, 10 times, or 100 times, because the maximum loss is 1/20.
(Of course, if you have a strong risk tolerance, you can even use 1/10 of the funds. If you have a low risk tolerance, you can open a position with 1/50 or 1/100 of the funds)
Stop loss discipline: This discipline is very important and must be followed. That is, you cannot cover your position, and you cannot increase your position after a loss.
In simple terms, after losing 1/20 of your funds, you cannot add margin to hold orders, and after losing another 1/20 of your funds, the funds cannot be greater than 1/20 when you open a position next time.
This stop-loss plan has already avoided two of the three major factors of liquidation (high leverage and copycats). The only discipline to be enforced is not to cover your position and not to increase the amount of your next position after a loss.
