Many people verbally say they "can accept cutting losses"
But when it comes to real trading, it often goes like this:
Loss of 20 U: Can still calmly joke
Loss of 200 U: Start to frown, the frequency of watching the market doubles
Loss of 2,000 U: Heart rate accelerates, hands start to shake
Loss of 5,000 U: No liquidation yet, but the mindset has already collapsed
Then a series of familiar scenarios will appear:
The stop loss that was originally set starts to move downwards
Clearly should close the position, yet holding on stubbornly
While saying "technique is very important", using a completely uncontrolled mindset to click randomly
So the question is not:
"Are you willing to cut your losses?"
Instead:
"At what maximum potential loss could you still remain clear-headed and execute this trade?"
In this article, we'll break this matter down and explain it clearly:
How much should you lose on a single trade to avoid completely losing your composure?
How do most people ruin themselves by pushing themselves to the limit without setting any limits?
You can use a "single loss limit template" right now.
First, no matter how good your skills are, if you can't overcome your "psychological limitations," it's all for nothing.
You can ask yourself a question first:
Think back to your most recent trades that were the most painful, the most frustrating, and the ones where you most wanted to turn things around.
What truly breaks you is not just losing a few percentage points, but also how much money you lose.
The most common answer is:
"It's not a matter of a few percentage points dropping; it's that the absolute amount of that transaction was too large."
"When I lost that much money, I completely lost control."
In other words:
The diagrams are easy to understand, and the logic is clear.
What truly ruins you is the moment you exceed the amount you can afford.
A single trade resulted in a huge loss; the problem isn't just that the money is gone.
You will start to doubt your system.
You will subconsciously think:
"I need to recoup this loss quickly."
All your next actions
Everyone will be dragged down by this loss.
At this point, discussing technology and systems is essentially meaningless.
The person is gone, and the skills learned are wasted.
Second, don't ask "How much can I earn at most?" first, ask:
"What's the maximum amount I can lose in one trade that won't make me lose my temper?"
This number is actually your maximum risk limit for a single transaction.
Most people who "live long" have a very simple bottom line:
A single trade can result in a loss of up to 1%–2% of your total capital.
You might think this proportion is "pitifully small".
Especially when the principal is small, it seems even less.
But first, let me do some math with you 👇
Assumption 1: You use a strategy of "losing 10% on each trade"
Funds: 10,000 U
Each loss per transaction: -10% = -1,000 U
if only:
If you make three consecutive mistakes: your value will decrease from 10,000 to 7,000.
Five consecutive wrong entries: the score drops directly to 5,000.
This is just a "normal series of errors".
And that doesn't even include the fact that the more you lose, the more excited you get, and the more excited you get, the more you buy.
The key is:
Each time, the loss is 10%.
Every time a stop-loss is triggered, it feels like a piece of your mind is being torn apart.
It's difficult to maintain that intensity.
Maintain a "calm execution system" state.
Assumption 2: You use a strategy of "losing 2% on each trade".
Same amount of money: 10,000 U
Maximum loss per transaction: 2% = 200 USDT
Five consecutive wrong trades: a loss of 10%.
10 consecutive wrong trades: 20% loss
You will feel uncomfortable, but—
Still within the adjustable range
You have time to change strategies, fix systems, and adjust your mindset.
You still have the right to say, "I'll keep practicing."
That's the difference:
A 10% cut is like kicking you straight off a mountainside.
A 2% cut is enough to allow you to slip and fall on a mountain road, but not to roll all the way down.
3. Why do I advise beginners to reduce their "single transaction risk" to 1%–2%?
It's not that I'm being conservative, it's just that you really can't handle a higher pace right now.
There are three reasons 👇
1) Your skills are currently unstable, so it's inevitable that you'll make mistakes repeatedly.
In the first year or two after entering the market, you will inevitably encounter:
Emotional trading
The new system hasn't been properly integrated yet.
Misunderstanding of market trends
Leaving aside high-frequency, complex, and fancy strategies,
just:
Stop loss was placed too early
The stop-loss was placed too late.
It should be empty, but it's not; it should be plentiful, but it's not.
These most basic mistakes,
That's enough to make you make several mistakes in a row.
People with high single-transaction risk:
After making two consecutive mistakes, I started to break down.
After making three consecutive mistakes, I started to question my existence.
People with low single-transaction risk:
Even if I make 5 mistakes in a row, I can still handle it.
There's room for gradual correction, rather than giving up and leaving after just one or two attempts.
2) Your mindset isn't strong enough to handle big ups and downs.
You can imagine two scenarios:
Scene A:
A single order resulted in a loss of 3,000 USDT.
You stare at your phone, unable to speak for half an hour.
I basically didn't need to sleep that night.
Scene B:
A single order resulted in a loss of 200 USDT.
It's uncomfortable, but I can still eat normally and review the situation normally.
Which scene is more likely to be something you can endure for a long time?
This is the psychological cost resulting from the difference in risk per transaction.
A single loss that's too large isn't just a matter of money.
Instead, you'll start to fear "doing it again."
This led to a vicious cycle of "reckless actions → huge losses → fear → more reckless actions".
3) If you want to use compound interest in the future, the prerequisite is—don't wipe out your principal first.
What is the premise of compound interest?
Principal in
mindset
The system in
As long as these three things remain, you have a future.
A single loss is too large, and it hurts:
Principal: The number visibly shrinks.
Mindset: You start to be afraid to execute stop-loss orders and afraid to enter the market.
System: You're starting to doubt everything, wanting to start over, wanting to change things, wanting to overturn everything.
That's why I said:
"If you can't control individual losses, talking about techniques and compound interest is just self-deception."
IV. So how exactly should this be determined? Here's a method of "working backward from practical experience".
Let's create a configuration template that you can directly copy.
Assumption:
Your trading capital is 10,000 U (the number can be changed, the logic is the same).
Step 1: First, set a "maximum loss per transaction".
suggestion:
Beginner / Currently in the basics stage: 1%–2%
Slightly more mature: 2%–3% (any higher and it becomes very dangerous)
Let's take 2% as an example:
Maximum loss per stop-loss order = 10,000 × 2% = 200 U
👉 This is the "maximum psychological and financial cost" of your order.
Step 2: Determine "Where should the technical stop-loss be placed for this trade?"
For example, if you are trading contracts/spot swings:
You are interested in a certain support level/structural level.
What do you think:
"If it falls below this level, it means I made a mistake this time."
if:
Entry price: 100
A technically reasonable stop-loss: 95 (admit the loss if the price drops by 5%)
So:
Stop-loss distance = 5%
Maximum loss per transaction = 200 USDT
👉 The maximum notional position size for this order = 200 / 5% = 4,000 U
In other words:
No matter how optimistic, excited, or FOMO you are,
This order has a maximum position size of 4,000 USDT.
Doing any more would be crossing your own bottom line. It's not that you have a "good opportunity," it's that you're "acting out of your urges."
Step 3: Simultaneously "tie" the leverage and margin as well.
If you are playing contracts:
You plan to use 2x leverage:
Notional position 4,000 USDT → Margin 2,000 USDT
You plan to use 4 times leverage:
Notional position 4,000 USDT → Margin 1,000 USDT
But no matter how many times it is used...
The bottom line of "losing a maximum of 200 USDT" for this order cannot be changed.
Note the order:
First determine how much loss you'll incur, then decide how large your position size will be.
It's definitely not the other way around: first, maximize your position size, then see how much you'll lose.
5. What if the principal is very small, and 1%–2% feels "uninteresting"?
This is where many beginners with limited funds often struggle:
"Teacher, I only have 2,000 U,"
1% equals 20U.
What's the point of doing this?
It hurts to hear, but I have to tell the truth:
A small principal amount does not necessarily mean that the risk ratio for a single transaction should be increased.
Your current risk tolerance is limited.
What you need now is to "live longer + learn steadily".
The small principal amount only indicates that:
To force a rise from 1%–2% to 5%–10%,
It's not about "improving efficiency," it's about "speeding up the clearing process."
Your primary goal in trading right now should be practice, not a quick turnaround.
Practice: Execution
Practice: Chart analysis, order placement, stop-loss, and post-trade analysis.
Practice: Staying clear-headed amidst fluctuations
When your initial investment is small, every dollar you lose is worth more than it will in the future.
Now, you feel the pain of losing every 100 USD.
In the future, when your funds increase, the cost of this kind of "heartache" will be even higher.
The more meticulously you control losses in the early stages, the greater your chance of growth.
To put it bluntly:
The smaller your initial investment, the less you should act recklessly.
Instead of thinking, "It's only a small amount of money anyway, so I'll give it a shot."
VI. Simple rules that you can "execute at a glance"
You can write the following items directly next to your transaction log/screen:
Maximum single loss = 1%–2% of total account funds
Any stop-loss order exceeding this amount will be considered a "violation of regulations".
Three things must be answered before placing an order:
At what price should I set my technical stop-loss?
From entry to stop loss, how many points is the distance?
Based on the maximum loss per trade X U, what is the maximum nominal position size that can be opened for this trade?
Stop-loss triggered = planned loss, no retaliatory measures allowed.
After being stopped out, it is not permissible to immediately double down in the opposite direction.
Once the daily single-trade loss reaches its limit, it is necessary to stay out of the market and calm down for a period of time.
If a single loss keeps you up at night, you must reduce your position size next time.
This is a signal your body is giving you:
"You can't handle this amount psychologically."
Next time use a slightly smaller number.
Adjust yourself back to a level where you can perform normally.