Position Management

No one can achieve 100% win rate in trading, so you should think about how to make money.

If you make money based on win rate, then you should play it safe, requiring stability. For example, to seek stability, look at yesterday's trading framework; you might not even trade. If you don't trade, then you don't trade; it’s okay to miss out. There’s usually no market activity over the weekend. Look at those few days of plummeting prices; if you used a stable strategy, wouldn't you make a lot of profit? This is the win rate, but the downside is that you might also miss out on big market movements.

By making money through the profit-loss ratio, many trades can be tried and errors discovered; if something is wrong, you can break even or take a small loss before exiting, but maximize the big gains. Your win rate may be low, but the losses can be offset by the large profits, resulting in overall gains. You must not miss out on major market movements, but the downside is that the win rate will decrease. Your position management and stop-loss must be properly executed, and your mindset must be able to hold steady. (Many top traders use this method because pursuing the profit-loss ratio involves continuous trial and error, which is relatively easy, while pursuing the win rate is much harder.)

The fault tolerance of trading, as I just mentioned, is that it is almost impossible for any trading framework to always be in profit, or to say that once you enter a trade, it will always be floating in profit, and there will never be a floating loss. The same applies to short positions. Therefore, fault tolerance needs to rely on stop losses. Let me give you an example: for instance, if you open a long position at over 80,000. If your position management means you have no forced liquidation price, then have you considered that your probability of hitting 100,000 and making a profit is almost 100%? Of course, I am not saying that everyone should do it this way.

This involves full position and isolated position. The contract must be done with a full position. A stop loss must be set. So why do I say that the winning rate of a high risk-reward ratio strategy is low, but you can still make money? If each small loss is managed using the position allocation ratio I mentioned earlier, then each small position's stop loss only accounts for about 1% of your entire position. What does that mean? If your total position is 100u, your stop loss would only lose 1u, but if this trade catches a big market movement, then you might earn 10u.

The trading framework includes position management. Many people think that as long as they know the entry and exit points, they will definitely make money in the long run. This is not the case. For example, if I only give long orders and always tell you that going long will only win 100,000, you will find that people who manage their positions well can actually earn 100% from position management, while those who do not manage well may face liquidation in between. This is an extreme example. Therefore, do not let your chaotic position management affect your ability to make money.