Last week I talked with a friend about contract trading. He executed 23 trades this month, made a profit on 18 of them with a win rate of nearly 80%, but ended up with a total loss of 10%. $pippin

Upon closer inspection, I found that with 18 profitable trades, he averaged a 5% gain per trade, totaling only 90%; $ZEC

However, with 2 losing trades, he lost 50% on each, completely wiping out all profits. $LUNA

This is the Achilles' heel of most retail investors: small wins countless times, but a big loss once leads to zero. ​

The root of the problem is actually the human “prospect theory”:

When making some money, one wants to run, fearing the profits will fly away; when losing money, one stubbornly holds on, always hoping for a rebound.

My friend is a typical example. He sells when SOL and ETH rise by 5%, thinking “it’s good to secure profits”; yet when altcoins drop by 50% and get forcibly liquidated, he still thinks “just wait a bit longer.” ​

Institutions are precisely focused on this:

Retail investors take profits at 5%, while institutions push it up by another 30% after the 5%, waiting for retail investors to chase the high before dumping; when retail investors are down 20% and stubbornly hold, institutions gradually wear them down until they are numb, then crash the price to force them to cut losses. Worse yet, many people end up adding to their positions to average down, ultimately getting completely trapped. ​

Breaking through this isn’t hard; just remember the principle of “risk-reward ratio 2:1”:

If you're willing to risk 5%, you should aim for a return of 10%. Even if the win rate is only 50%, with 10 trades, 5 winning trades at 10% and 5 losing trades at 5%, the net profit will still be 25%. ​

Specifically, it comes down to three steps:

Before buying, calculate the risk-reward ratio; if it doesn’t reach 2:1, don’t execute the trade; set automatic take-profit and stop-loss orders, don’t rely on your willpower; record the risk-reward ratio for each trade, and at the end of the month, review to identify where the issues are. ​

Don’t think that a small capital means you shouldn’t care; the smaller the capital, the more afraid you are of big losses.

Using this method, my friend's 23 trades should have made a profit of 160%, not a loss of 10%.

Retail investors losing money is not due to lack of precision, but rather a lack of understanding of how to control the risk-reward ratio.

Remember: don’t take trades with insufficient risk-reward ratios, rely on a system rather than feelings, and keep a record of your reviews to become one of the few who make money. @juice实盘带单