Staring at the green light screen until six in the morning, I swallowed my third sip of cold coffee and finally saw the human nature game behind the candlestick chart.
At six in the morning, the glow of the long position in Bitcoin still reflected on my face. Suddenly, a message popped up in the trading group: 'Eighth time hitting the stop loss! Just 0.4% away!' I stared at this line, as if seeing my three-years-ago self—back then, my position was breached just 0.3% away from the stop loss line, and my three-month profits instantly vanished, my hand holding the mouse trembled uncontrollably.
Now leading the trading group, I have never suffered such losses again. Last time Ethereum retraced to $1980 to build a position, I set a 2.2% stop loss, and the market minimum fell to $1995 before rising. The group members were amazed by the accurate prediction, but there are no mysterious forecasts; it is just three iron rules guarding our positions: reduce positions immediately if liquidity falls below 50% of the daily average, never hold on when there are no buyers; absolutely do not open positions when the price difference expands five times; the stop loss distance must be at least 30 times the current price difference.
01 The ghost of stop-loss strikes at dawn.
I remember when I first entered the industry, I always set stop-losses at seemingly safe technical levels, only to be precisely knocked out in the early hours. Later, I reviewed the data and found that 80% of stop-losses occurred during periods of abnormal liquidity. Once, at four in the morning, the price spread suddenly widened sixfold, and my stop-loss order was like a sandcastle on the beach, washed away by a single wave.
The marking price mechanism of exchanges is an invisible killer. When the deviation between spot and contract prices reaches 2%, the system uses the average price from multiple exchanges to calculate the liquidation line. This means that even if the price on your platform is stable, you could still be forcibly liquidated due to overall fluctuations. After that liquidation, I combed through the data and found that the vast majority of retail traders' stop-losses were densely distributed at several key price levels, which were obvious targets in the eyes of algorithms.
The market sometimes feels like a machine specifically designed to harvest stop-losses. Once, within 15 minutes of Bitcoin breaking $115,000, the entire network liquidated $630 million, with 98% of liquidations concentrated at the moment of the breakout. These investors didn't misjudge the direction; they set their stop-losses at a point easily seen through by algorithms.
02 Hidden trading costs, silent profit devourers.
Many people, when calculating profits and losses, only focus on the entry price and exit price, neglecting hidden costs. Entering at a spread of 0.8%, the transaction cost alone takes up 0.4%, plus the holding fee, resulting in a net loss of 1.2% in a day. This small wound bleeds continuously, and after a month, it can lead to painful losses.
The most painful lesson I've seen is from a netizen boasting about his experience of 'almost stopping loss.' He entered when the spread widened sevenfold, initially calculating a sufficient stop-loss distance, but forgot about slippage, the invisible killer. As a result, when the stop-loss was triggered, the actual transaction price was 1.2% lower than the preset stop-loss price, directly breaching his risk threshold.
Stop-loss orders ensure execution but do not guarantee price. In extreme volatility, market orders may be executed at significantly deviated prices. Although limit stop-loss orders control the price, they may not be executed at all. This is the dilemma that traders must face.
03 Three iron rules, the transformation from prey to predator.
After ten years of trading cryptocurrencies, from losing everything to achieving stable profits, I owe it all to these three ironclad rules.
Liquidity is the soil for the survival of stop-losses. In a market without liquidity, even the most accurate stop-losses are mere empty talk. Now I only trade when liquidity is above 70% of the daily average, avoiding holding firm when there are no buyers. When market liquidity is insufficient, spreads can widen sharply, making entry feel like building a house on quicksand.
The stop-loss distance must include the spread factor. When the spread increases fivefold, my stop-loss distance automatically adjusts to 30 times the usual. This not only leaves breathing room for the position but also helps to avoid being mis-hit amidst market noise.
Withdraw 40% of the principal from each profit. This habit gives me capital to make a comeback forever. The market never lacks opportunities, it only lacks the capital to survive to the next opportunity. Having cash in hand changes the mindset completely.
04 The essence of trading is a survival game.
Many people are obsessed with technical analysis, fantasizing about finding the holy grail of undefeated victories. But in real trading, mindset is more important than technique. Trading cryptocurrencies can put you on a roller coaster for 24 hours; earning too much can make you float, while losing too much can lead to a crash. When the mindset is unstable, even the best techniques are hard to withstand a round of bull and bear markets.
70% of people in the market lose money, not because their skills are insufficient, but because human nature is hard to resist. Chasing highs and cutting losses is human nature, struggling with stop-losses is human nature, and overtrading is also human nature. Successful traders do not lack these psychological tendencies; they simply bind their human nature with rules.
I never pursue precise predictions; I only focus on how to minimize losses when I'm wrong. An excellent trading system may have a win rate of less than 50%, but it achieves profitability through a high reward-to-risk ratio. Acknowledging that mistakes will happen is essential to formulate effective stop-loss strategies.
Every time I open the trading chart, I remind myself: that young person trembling at six in the morning is still watching. Now, new members in the group often ask, 'How do you determine the stop-loss point?' I point to the spread curve and depth chart on the screen—when the gap between the buy and sell price is large enough to drive a vehicle through, any stop-loss feels like trying to catch water under a waterfall.
True trading wisdom is not about accurately predicting the market, but about smartly managing oneself. When setting stop-losses, not calculating costs is like driving without looking at the fuel gauge; liquidation is just a matter of time.#巨鲸动向 $ETH
