The real definition of the so-called stop loss is that the set stop loss price should not be broken down casually. The stop loss area will be protected by the market trend, which is an excellent defensive point. When the market price is close to reaching the stop loss area, then the market will have a high probability that it will reverse. When the market price breaks through the stop loss area, the market will inevitably trigger a large number of stop loss orders. In the risk of adverse trends, this is a taboo in trading.
Sendi, chief analyst at Huichacha, believes that traders who do not use stop loss tools will most likely die in the end.
Several common methods of stop loss
1. Technical stop loss
It combines stop loss setting with technical analysis, and sets stop loss orders at key technical positions after filtering random market fluctuations, so as to avoid further expansion of losses. This method requires investors to have strong technical analysis ability and self-control ability.
The technical stop loss method has higher requirements for futures investors than the former one, and it is difficult to find a fixed mode. For example, moving average stop loss, channel line stop loss, trend line stop loss, RSI stop loss, Bollinger band stop loss and so on. This stop loss method is closely related to the investor's trading system, and its advantage is that it is simple and practical. The disadvantage is that it is too mechanized, and it is recommended for investors who are new to the futures market to use it.
2. Time stop loss
This is a time-based stop loss method in which the stop loss is placed outside the limit price for a certain period of time, such as the lowest or highest price of the day before yesterday or the previous week, or the highest or lowest price of the day. point. Such a stop loss method is closer to the concept of support or resistance than the price fluctuation itself. Its main idea is that if the price has not moved beyond the limit point in the past time period, then if the trend has not changed, the price will not change. It will not exceed this limit price.
However, this stop loss method is relatively basic. In addition, if the main body of time is slightly changed, we will turn it into a proof-style stop loss, and set a position within a time period.
The method of time stop loss pays attention to the specific trend that may appear in a specific time and market environment, and once it exceeds this time, it means that the time for the market to launch an attack has not arrived, or the market momentum in this time period It can't meet the previous expectations. In any case, this has made the continued position full of more variables. At this time, you should stop the loss and exit the market in time.
3. Fund management stop loss
Money management has two purposes: survival and success. The first is survival, the second is trying to maintain a steady payoff, and the last is making a huge payoff. Beginners generally get these priorities reversed. They go straight to the huge profits, never thinking about how to survive in the long run. Putting survival first allows you to focus on money management.
Serious traders usually focus on minimizing losses and building capital. It is recommended that a single loss should not exceed 3% in any case, and allow yourself a maximum of 10 consecutive times, so the maximum drawdown of our account is 30%, which can ensure that investors have a good attitude.
The most common mistake of stop loss
1. Failure to set a stop loss before entering the market
The price of the stop loss must be confirmed when entering the market, instead of looking for the price of the stop loss when the market is not favorable to you after entering the market, because before you enter the market, it is the most important thing to look at the market Objective; when setting the stop loss price before entering the market, it must be repeatedly confirmed that the stop loss price has substantial significance, especially in the short-term operation, the design of the stop loss must take into account many factors. set up.
2. Constantly change the stop loss
When the originally set stop loss price reaches the price, it should be executed. After entering the market, it is very unwise to constantly change the stop loss. In the case of funds, in many cases, it may not be accurate Executing a stop loss can escape a catastrophe, but if you develop such a bad habit, one serious injury is enough to erode all your hard-earned profits; and the more important loss is that when you keep changing your stop loss , What you lose is the objective mood and opportunity to re-enter.
3. Stop loss due to emotion or warehouse pressure
If the stop loss price is not well designed, it is easy to encounter stop loss due to warehouse pressure or fear. This means that at the beginning of entering the market, you have no enough chances of winning. If you have to execute the stop loss, then such a transaction is basically the same as gambling, and the emotion of fear oppresses yourself to execute the stop loss, which is usually the wrong stop loss price.
4. Design stop loss based on loss
This type of stop loss is the concept of stop loss that most people make mistakes. The root of the error comes from not being able to jump out of the shackles of the trading model; when designing the stop loss price, first frame yourself because of the design of the trading model, for example: I set a profit of 60 points, so the stop loss can only be 30 points. Another example: my stop loss setting can only be 3% of the principal, so I can only set a stop loss of how many points; another example , Some people will set a stop loss of 30 or 50 points when they enter the market, but they do not monitor in detail whether the stop loss price of 30.50 points is the stop loss area of the market It is absolutely wrong to design stop losses like this, because the market is a chaotic body, and your own model is only a small part of it. Only the stop loss of the market is the correct stop loss, not yours. The correct stop loss is the correct stop loss.
Sendi, an analyst at Huichacha, said that speculative trading is a probability game. Since winning depends on probability, failed transactions are inevitable. Therefore, when doing foreign exchange trading, you must set a good stop loss.
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