Profits always take care of themselves, but losses never automatically settle. ——Jesse Livermore

Losses are the prerequisite for profits

Trading profits, in the final analysis, must be achieved by capturing trends. Trading technology is trend prediction technology. Even in a volatile market, the so-called "reversal" is based on a low-level trend with a small stop loss and a high profit-loss ratio near the false breakthrough position.

The premise of trend trading is to grasp the profit-loss ratio. A good profit-loss ratio must first confirm the position and amplitude of the stop loss-that is, to make a successful transaction, the first thing to do is to solve the problem of losses.

Only when you know what the most unfavorable situation is, can you really place an order. After placing an order, even if the result of the transaction is "-1R", it is a correct transaction. At this time, losses are also a correct component.

Van Tharp once said that the fun of trading lies in the possibility of losses. The purpose of trading is not to make a profit, but to abide by the trading system. Under the constraints of the trading system, misjudgment of market errors must not be a real error.

A single loss only represents the loss of an individual position, not a failed transaction. Losses are an inevitable part of trading, and traders must accept them calmly.

Only when trading gets out of control and a small loss turns into a big loss, will a trader really fail.

Losses must be accurate

I once read a sentence in the Rockhawk Trading Method: The biggest secret to growing a trading account is to avoid losses.

The axiom that really makes traders successful is the compounding effect, and the deep drawdown of the account net value is the biggest enemy of the compounding effect. Under the protection of a viable trading system, the only reason for a deep drawdown in the account is uncontrolled losses.

Before starting to win, traders must learn to stop losses. Failure to correctly view losses often means that traders are unwilling to accept the reality of losses. And unwillingness to accept the reality of losses often means that the scale of losses will become larger and larger.

Once a transaction has failed, it must be admitted and immediately admitted to the loss. The key to winning in trading is not to lose too much when losing. If the loss position can be admitted, profits will naturally accumulate.

Losses can occur, but they must be controllable and precise.