Speculating/gambling/investing in the market is actually not much different from setting up a street stall to do business. It's nothing more than making more money and losing less.
Here I will explain what "setting positions based on losses" means.
Imagine that you like to eat egg pancakes and can make the best egg pancakes in the world, so you decide to set up a stall to sell egg pancakes at the night market on weekends.
Each egg pancake sells for 3.5 yuan, and the cost is 1.5 yuan, so you make a net profit of 2 yuan for each one sold. You expect to sell 50 egg pancakes tonight, but the night market business is risky and you may not be able to sell them all every time.
So before you start, you do a little calculation: If you can't sell many egg pancakes, what is the maximum loss you can accept? You think about it and feel that the maximum loss cannot exceed 15 yuan, which is equivalent to the cost of 10 egg pancakes. So you set a "stop loss point" for yourself: if you only sell 10 or less egg pancakes by 9 o'clock in the evening, you will decisively close the stall and go home to avoid greater losses.
The calculation formula is simple:
Position = total capital × bearable loss percentage / capital change for each 1-point fluctuation of each transaction target × stop loss range
In this example:
1. Total capital = 100 yuan
2. Bearable loss percentage = 15%
3. Capital change for each 1-point fluctuation of each transaction target = 1.5 yuan
4. Stop loss range = 10 egg pancakes
Substitute into the formula: 1 lot = 10 egg pancakes, maximum loss 15 yuan.
Okay, at this point, you can not only make the most delicious egg pancakes, but you can also calculate the risks. The next step is to find a night market stall and start selling egg pancakes.
