Many traders underestimate the importance of position size and exit decisions, resulting in excessive risk for each trade. In fact, this bias is very subtle and is easily overlooked by many traders. Proper position management determines the execution efficiency of the trading system, and the execution efficiency of the trading system determines the final performance of real trading.
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Traders are also human, and as long as they are human, they will inevitably have emotions and will be more or less affected by them. This is unavoidable for anyone.
For example, suppose there are two traders, A and B, each with an initial capital of 200,000 yuan, using the same historically tested successful system, trading the same products, and trading at the same time. Imagine, under the premise that all conditions are almost completely the same, will their final performance be similar? Not necessarily, and there could be a significant gap.
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Why is that? Because their position management methods are different.
Although both have 200,000 yuan, the significance of that amount is different for A and B. For A, 200,000 yuan is half of his assets, while for B, it may be less than one-tenth. Therefore, the pressure on the two individuals is completely different. A faces significant pressure compared to B and is very fearful of the arrival of a loss period. If a loss period occurs, A's execution efficiency will face a very severe test, while B is relatively much more relaxed because there are more assets behind the 200,000 yuan, while A is pushed into a situation where he cannot afford to lose.
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Through this example, I want to say that things outside of trading are very important; they can directly or indirectly affect the trader's psychological state, because traders are human.