In trading, the most important concept is stop loss.

Many people can maintain rationality when facing losses initially. Most can execute a stop loss with losses of 20% or less. But once losses exceed 50%, their psychological defenses begin to collapse. At this point, the first instinct that emerges is often to add to the position, not to cut losses. Because losses are already more than half, it's difficult for people to accept admitting failure, so gambling psychology quickly overrides stop loss discipline.

This is why many people ultimately end up with total losses. In fact, it's not that they can't read the trend, but after accumulated losses, their psychology starts resisting reality, and they sink deeper and deeper.

Most people have a misaligned approach to profits and losses: they hold stubbornly through losses, and rush to sell at breakeven or small profits. They ignore the trend and only stare at their account balance. The result is devastating losses, while gains are merely marginal.

The correct approach is the opposite: let profits run when winning, exit decisively when losing.

My principle is simple: when profit reaches 15%, if it pulls back to 10%, I take profit; if the trend continues, I hold. After buying, if it drops and losses exceed 5%, I cut losses decisively.

Do the math: taking profit 10% at a time while limiting losses to 5% or less, even with only a 50% win rate across 100 trades, returns can reach 300%. The method isn't difficult; what's hard is overcoming greed and fear.

When your losses reach 10%, ask yourself: would you still be willing to add to this position? If not, sell immediately.

Timely stop loss means admitting you were wrong but never making the mistake worse. It's like when driving into danger—the first reaction is to hit the brakes, not to floor the accelerator.

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