Do you remember when I first got into futures trading? I always thought that 'stop loss' was the behavior of a coward. Every time I set a stop loss and got stopped out, the price quickly returned to its original track, convincing me that 'stop loss means getting cut'. So I chose to hold on, and what was the result? Earning ten times wasn't enough to cover one loss. The most painful time, I watched my account balance evaporate quickly, yet I kept telling myself, 'just wait a bit longer, it will come back'. In the end, the numbers on the screen broke my heart, that was my savings of more than half a year.
Does this story sound familiar? In the futures market, most people don't lose to the market, but to their own 'just hold on a bit longer'. Today, I want to share with you the real experiences behind the term 'stop loss', which are more important than the techniques.
90% of people don't not understand stop-loss; rather, they 'can't bear' it.
Investment master Soros once said a classic line: Investing itself has no risk; only uncontrolled investing poses a risk. It took me three years to truly understand this.
I have a friend who once turned 200,000 into a million during that bull market in 2020, becoming a 'star' in our circle. But during a crash last year, he stubbornly believed it was just a normal correction and kept doubling down, resulting in a return to square one overnight. Why? Simply because he didn’t believe 'that trade' would continue going against him.
I deeply resonate with this mindset. A stop-loss means admitting you were wrong, which is the hardest thing for human nature to do. So we find various reasons to convince ourselves: it has dropped so much, it should bounce back, right? The fundamentals are still good! The main force must not have sold… We would rather endure certain pain than face the uncertainty of the unknown.
But true trading experts understand: being right about the direction is not as good as making the right decision. This industry is always full of stars; what’s lacking are the old-timers.
The greatest traders in the world have a simple and useful trading principle — the 'Crocodile Principle'. This principle comes from the way crocodiles swallow their prey: the more the prey struggles, the more the crocodile benefits. If a crocodile bites your foot, your only chance of survival is to sacrifice one foot. In the futures market, when you know you’ve made a mistake, the only choice is to exit immediately.
From 'shaky hands' to 'decisive actions': my stop-loss mindset
1. Three-second setting method
The first rule I set for myself is: within three seconds of placing an order, the stop-loss must be set. It’s like buckling your seatbelt as soon as you get in the car; you might never need it, but using it even once can save your life.
My stop-loss level usually refers to the leverage ratio: high leverage corresponds to a small stop-loss, while low leverage can be appropriately relaxed. For example, with 20x leverage, I generally set the stop-loss at around 5%. Don’t think it’s too narrow; a narrow stop-loss allows you to survive longer. More importantly, it avoids the 'stop-loss hesitation syndrome' — clearly intending to stop-loss but wavering when the position arrives.
2. Moving stop-loss method
Once there is a floating profit, immediately move the stop-loss level up. This is my core mindset: let profits take care of themselves.
My specific approach is: when I have a 5% profit, I raise the stop-loss to the cost price (this trade won't lose anymore); at 10% profit, raise the stop-loss to the 5% profit level; at 20% profit, raise the stop-loss to the 15% profit level. The benefit of this approach is that it preserves most of the profits without being shaken out of the position too early due to small pullbacks.
Remember: what the market gives you, you must keep a portion; don't always think about eating it all from start to finish. Greed is the biggest enemy in contract trading.
3. Emotional brake rule
In contract trading, the most dangerous moments are often the most extreme emotional moments. I set two iron rules for myself:
First, if there are three consecutive losses, immediately turn off the screen and exercise for half an hour. Second, if you are particularly excited after a big profit, immediately take some profits and put them into your wallet.
Decisions made when emotions run high will likely lead to regret. When you realize you've made a mistake, exit immediately without looking for any excuses, reasons, or expectations.
Practical case: How to 'lose less but earn a bit'
I remember a classic operation on Ethereum from the middle of this year. After entering, the price didn’t start immediately but fluctuated for quite a long time. I planned to set the stop-loss 2.5% below the cost, limiting my losses even if my judgment was wrong.
Later, the market finally started, and I didn’t rush to take profits but instead kept raising the stop-loss level. Ultimately, this trade captured most of the subsequent gains with very little drawdown.
This trade deeply taught me: good trading is not about buying at the lowest and selling at the highest, but being in the market when the trend is right and having exited when the trend is wrong.
This aligns with another experienced trader's view: appropriate and timely stop-losses prevent investors from incurring greater losses. The winning rate of trend-following operations is greater than 75%, while from a strategic investment perspective, its winning rate can reach 95%. In contrast, strategies attempting to catch tops and bottoms have a success rate of less than 1%.
Risk management is the cornerstone of survival.
In contract trading, fund management is more important than directional judgment. I always adhere to the following principles:
Overall trading positions should be appropriate, ideally without psychological worry; use funds in batches to reduce the overall risk of capital; if you need to double down, insist on doing so only after the first batch of positions has made a profit; set a maximum order amount to eliminate any thoughts of over-leveraging.
Practical experience shows that when the utilization of funds reaches 30%, it is the most appropriate for futures trading. Although the level of investors' skills can moderately adjust this ratio, 30% utilization is the baseline principle of capital management.
The effect of margin leverage amplifies price fluctuations artificially. When the position's direction is contrary to market movements, the cost of time becomes increasingly expensive. In unfavorable trading conditions, if the correct actions are not taken promptly, the invested margin may be breached, and all paper profits may be lost, even leading to a disastrous outcome for the entire capital.
Written in the end
Stop-loss is not surrendering, but a tactical retreat. Capital is your soldiers; don't let them sacrifice unnecessarily.
All traders who have survived in the market have experienced significant losses. The difference is that some treat it as tuition, while others see it as the end.
The market never lacks the next opportunity; what’s lacking is whether you still have capital by then. So, don’t treat every trade as your last shot. Take it slow; live longer to see further.
As a veteran in the futures market summarized: 'The secret to making money lies in time and a calm heart, in the patience of investors waiting and sharing the expansion of trends. The opening of space requires time, and time is the most critical factor.'
Let’s encourage each other with all the colleagues fighting in the contract market.#巨鲸动向 $ETH
