The Importance of Stop Loss: The Top Priority

In trading, stop loss helps you effectively control losses and protect your capital.

As shown in the figure below, a loss of 10% requires a profit of 11% to break even, while a loss of 50% requires a 100% return. The greater the loss, the exponentially higher the required return to break even. Therefore, setting a reasonable stop loss level is crucial.

Effective stop loss requires: setting a reasonable stop loss level based on risk tolerance and trading strategy, typically recommending that the stop loss level should not exceed 2%-3% of the total account assets.

Utilizing technical analysis tools: you can use moving averages, support levels, and resistance levels, etc., to help set stop loss points.

Maintaining discipline: strictly execute the stop loss plan, and do not easily change strategies due to short-term market fluctuations. Always pay attention to your asset reduction, use backtesting to adjust strategies, so that you can better cope with fluctuations in the market and reduce losses. Successful trading is not just about how to make a profit, but also about how to effectively control losses.