At two o'clock in the morning, I stared at the popping 'forced liquidation' prompt on my computer screen, spilling instant noodle soup on the keyboard for the third time. That year marked the fifth anniversary of my cryptocurrency trading, and the 10,000 value units in my contract account melted away like ice cream under the sun after I stubbornly held on for 72 hours, leaving not a shred behind.
Looking back now, I was the typical 'contract fool': I thought I could reach the sky when prices soared, and firmly believed in a rebound when they fell. When others advised me to set stop losses, I slammed the table and shouted, 'This is just a shakeout! If I hold on, I'll double my money!' What was the result? Doubling didn't come, and my account first 'flipped over.' Now, relying on a strategy that my fans jokingly call 'so dumb it's like picking my toes,' I earn a seven-figure annual income. When asked again whether to hold or set a stop loss, I can only counter with the question: 'Do you want to be a gambler, or do you want to be a long-term player?'
First, a cold shower: 90% of beginners make a fatal mistake by treating stop-loss as 'cutting losses and admitting defeat', and holding positions as 'contrarian investing'. This is not a question of choice, but a question of understanding. My first practical conclusion, learned from three liquidations: Stop-loss is not about making less money; it's about keeping your life.
The first liquidation was in 2018. I held onto the fantasy that 'the crypto market will always rise' and added 5x leverage during a pullback. At that time, my account was down 20%. A friend frantically messaged me to cut my losses, but I stared at the candlestick chart and told myself, 'It has dropped this much before, and it rebounded the next day.' What I got instead was not a rebound, but a waterfall drop. When the system automatically liquidated my position, I watched my account go to zero and experienced the feeling of 'my heart stopping for 3 seconds' for the first time.
Later I realized that the first misunderstanding beginners have about stop-loss is 'fear that the price will rise again after stopping loss'. But have you calculated the probabilities? Out of 10 times holding a position, there might be 1 time that truly rebounds and makes you money, but the remaining 9 times will only turn a 'small loss' into a 'liquidation'. It was like my third liquidation when I clearly saw it break a key support level, yet I always felt, 'This is a trap set by the market makers', stubbornly holding a position worth 10,000 until it went to zero. During that time, I only dared to use half a seasoning packet when eating instant noodles.
The real stop-loss is to equip your account with a 'safety cushion', not a 'brake'. Here I share the 'dynamic stop-loss method' I am currently using, which I have tested and can reduce the liquidation probability to below 10%. Pure practical advice without tricks:
1. Don't set a 'fixed stop-loss'; follow the 'live trend': Beginners love to set fixed percentage stop-losses, like cutting losses at 5%, but this often leads to being 'stop-loss hunted' by the market makers. I now tie my stop-loss line to the 20-day moving average or the edge of the recent oscillation range. If the trend remains unchanged, I hold on; once it breaks a key position, I exit immediately, no matter how painful it is. It's like stopping at a red light while driving, rather than staring at the dashboard, calculating 'if I go another 50 meters, will I get caught?'
2. Calculate the 'odds' before setting a stop-loss: Before opening a position, ask yourself two questions: 'What is the maximum I can lose on this trade?' 'How much can I earn when I profit?' If the odds are lower than 1:2, for example, if I can only earn 15,000 when losing 10,000, I abandon it directly. Now, when I open a position, it must meet the condition of 'losing 1 dollar to earn 3 dollars'. Even if I miss some opportunities, it’s better than blindly operating and getting liquidated.
3. Treat the 'holding addiction' as an enemy: Whenever I feel like holding a position, I open the 'liquidation memorial album' on my phone, which contains screenshots of my three liquidations and photos of me eating instant noodles at that time. Everyone has a sense of luck, but in the futures market, luck is 'suicide'. If I really can't resist, I reduce my position size to a level where 'even if I get liquidated, I won't feel the pain.' It's better than going all-in and losing everything.
Yesterday, a fan told me he couldn't sleep because of holding positions and asked whether he should cut losses. I didn't answer directly but sent him my diary after my first liquidation: 'Today, I lost all my savings, but I finally understand that in this market, staying alive is more important than anything.'
After trading crypto assets for 10 years, I've seen too many myths of overnight wealth and too many breakdowns at 3 AM deleting trading records. Futures are not a casino, and stop-loss is not admitting defeat; it’s about being responsible for your own money.
