Timely profit-taking is the key to dealing with drawdowns, but one must remain calm after exiting
When dealing with market drawdowns, timely profit-taking and locking in gains is the most effective strategy. However, this is just one step towards success. More importantly, once you exit the market, do not rush to reinvest out of impulse. I have seen too many people who made substantial profits during a bull market ultimately lose everything due to a moment of impulse to reinvest all their gains back into the market, resulting in significant losses.
The psychological traps of high-stakes trading
Many people fail to make a comeback often because they have participated in large trades and lost interest in small investments. In the past, they were accustomed to trading millions of dollars, and when faced with tens of thousands of dollars in investments, it is difficult to spark their interest; they constantly think about when they can recover their losses. Driven by this mindset, they are prone to taking high-risk strategies, such as leveraging, ultimately leading to irretrievable losses.
Lessons from a bear market
Although many may dismiss this now, when the market enters a bear phase, these lessons will become exceptionally profound and real.