How to view false breakthroughs? How to deal with false breakthroughs after setting the stop loss?
Never regret closing positions after a false breakthrough! There are two situations when the price breaks through the stop loss:
One is that the stop loss point is not properly selected and is not the focus of competition;
The other is that the stop loss point is very appropriate and the price is effectively broken through and the general trend is gone.
If it is the former situation, it is a blind fight and you should exit and redeploy. In the latter situation, you should decisively close your position and cut off your arm. Why should you decisively exit after a false breakthrough and never regret it?
(1) Of course, in theory, you can say that it is more stable to exit after the breakthrough is effectively confirmed, but in actual combat, the confirmation we hope to get puts us at great risk. **The more effective the support or resistance price you choose, the more intense the competition at this point, and the more rapid or drastic the breakthrough. **Your confirmation half a beat later than decisive exiting the position will risk a much greater capital risk than your original plan. Furthermore, what is effective confirmation? If you ensure the accuracy of confirmation, will you give up the determination to stop loss and the limit of stop loss? You should know that the stop loss point is a price point, not a space or an area.
(2) When the price returns to the original position after the stop loss, others think that you have made the worst choice, but in my overall thinking, it is not. I once encountered a customer who actively asked me to make an order. I only made such an order for him with a stop loss and a return to the original position. The loss was very small. He lost confidence in me, withdrew and said to others that I was "a terrible trader!" I was very calm because I never thought that I could do every order well. What I am good at is the overall thinking. My thinking is to improve the winning rate.
In such an overall thinking, a certain proportion of losing orders is inevitable. It is the price I must pay to ensure that I will never lose a lot of money and miss a big market. If you judge the quality of my trading from a certain time or a certain period, then the conclusion you draw is either perfect or terrible. Both views are one-sided and inaccurate. The client mentioned above failed to understand the overall idea and the idea that the whole is greater than the sum of its parts because he saw the profits and losses in two separate time periods.
So I went from extreme trust in me to extreme disappointment. In fact, an excellent trader only has a higher winning rate than the average person, and this winning rate can never reach 100%. If the market I just did appears again next time, under normal circumstances, I will still deal with it in the same way and never regret cutting my position. I know that this probability is not high. I exclude these probabilities from the profit and put them into the loss ratio. If I encounter similar situations, I will definitely lose a small amount of money. This is my active loss. This is the price I must pay for firmly adhering to the stop-loss principle. This kind of stop-loss that often occurs has ensured that I have not let customers go out of the market once in the past few years, and no loss has exceeded 10%. The total profit and loss ratio of the customer's funds is 12:1. I am a big winner in gambling. However, I am a winner who often makes mistakes. I dare not guarantee that there will be more correct orders than wrong orders, but my total amount can achieve such a large profit and loss ratio. In addition to luck and judgment, another important reason is: resolute stop loss and equally resolute winning. It is not as simple as saying that you should resolutely stop loss. Only after making local sacrifices can you win the survival of the whole. Only after you resolutely cut off the poisoned arm can you ensure the continuation of healthy life.
(3) After confirming a false breakthrough, you can still kill back. The risk of doing so is much smaller. I was forced to close my position twice at a stop loss point due to false breakthroughs. But when I confirmed it was a false breakthrough again, I stubbornly killed it again for the third time. Although people around me thought it was incredible, some even thought that I was deliberately speculating or even deliberately losing money. But this third time made me a lot of money. In comparison, the losses of the first two stop losses seem insignificant.
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