The core of all trading strategies is to make profitable positions gain as much profit as possible, and to make losing positions lose as little as possible. If you cannot put money management and risk control first, no matter how much money you have made, you will have to pay it back one day.
A. Basic principles of fund management
Investment guru Soros once said: "There is no risk in investment itself, only out-of-control investment has risks." As the trading years gradually increase, , I realize more and more that the technologies I once pursued so hard are becoming simpler and less important. We seem to have taken many detours, and only now do we understand that the success or failure of a transaction ultimately depends on our level of fund management and risk control.
I used experience and lessons to tell myself that there may be nothing new in the futures market, or even some truths that everyone knows, but after years of struggling on roads full of thorns, these truths have long been established. Unforgettable and deep into the bone marrow...
Fund management and risk control are the core of survival in the futures market, the watershed of success or failure in trading, the root of all problems in speculative trading, and the determining factor of whether one can make long-term stable profits. important factors.
Don’t enter the market without management and planning of funds, risks and positions. The important principles and tactics for sustained and successful speculation are to control losses, control drawdowns, protect principal, lose small amounts and make large profits, and keep a good capital curve. Loss must be limited to a clear and controllable range at all times, so that you may become a real winner.
I once saw this passage on the Internet: “The fundamental difference between losers and winners is that the loser’s stop-loss point (actually the unbearable point) is too large, while the take-profit point is too small. Make money. It is an easy thing to wait patiently for the breakthrough of the classic chart and hold it patiently after the breakthrough."
We all know that the core of all trading strategies is to make profitable positions more profitable. The more, the better, and the less you lose on losing positions, the better. If you cannot put money management and risk control first, if you cannot always walk on thin ice and be cautious, then even if you have made a lot of money, you will have to pay it back one day. Therefore, only by continuously making profit withdrawals and consistently implementing the principles of capital, position management and risk control can we survive and develop in this market for a long time, and achieve achievements that we dream of and that others cannot achieve.
B. Make position adjustments at any time
As far as I am concerned, 70% of the positions can be traded during the day, and the corresponding stop loss must be small and fast, otherwise only Ability to trade with light positions. Generally speaking, heavy positions must be fast, accurate and ruthless, with small stop loss and small cycle, relying on courage to make quick decisions; light positions rely on endurance and time to make money. Specifically, heavy positions can only be used in two situations: one is to use heavy positions in short-term intraday trading, in order to pursue profits as soon as you enter the market, otherwise you must take a small stop loss and leave the market quickly; second, in the trending unilateral market , with the profit and direction protection of the initial position opening, it can be turned into a relatively heavy position by adding positions.
Except for the above two situations, you must not hold uncontrollable heavy positions at any time, and you must never trade with heavy positions, because excessive positions can easily lead to an unbalanced trading mentality and large losses in a single transaction or a single day. . Excessive stop loss, overweight positions, and lack of strict capital management rules are always the main reasons for trading losses. If you don't use the wrong methods to make money from this market, then this market will not punish you. Countless experiences and lessons have proven that the following aspects need to be noted:
First, when opening a position, determine the opening ratio according to each market level and the position on MA60 and MA20, and only do each level* It is a high probability form of ** shock. Different levels of ** shock should correspond to different positions. Try to avoid oscillating market conditions, and make position adjustments at any time during oscillating and trending markets.
Second, the overnight position standard is to consider whether to leave an overnight position and the proportion of the position starting half an hour before the daily closing. Under the premise of floating profit protection, the vibration is driven by the direction of the seven indicators of the time-sharing chart, 1-minute K-line, 5-minute K-line, 15-minute K-line, hourly K-line, daily K-line, and weekly K-line. Match 20%-50% of the position. At any time, you must be cautious when placing overnight orders, and the most important consideration is risk. When the market cannot be read, the position left must be prepared to at least experience a reverse stop. If it cannot withstand it, it is an unreasonable position.
Third, the trend order adopts the position management strategy of following the trend, taking short positions, testing positions on the left, adding positions on the right, and reducing positions in stages. When the intraday time-sharing chart rises sharply or stops falling, it should be closed first. If you close a part of your position and make a short-term huge profit, you should be careful not to lose money and keep a part of your position until the trend reverses. In addition, the maximum proportion of the trial position shall not exceed 10% of the account funds. After the direction is verified, the position can be added at the new tipping point. The maximum position of a single product cannot be increased to 30% of the account funds.
C. Retracements must be strictly controlled
Paul Tudor Jones, a top trader on Wall Street, said: "Every day I assume that my positions are in the wrong direction. Stop loss point and control your maximum loss. I hope the market will be consistent with my expectations. If I am wrong, I have an exit plan to protect my bottom line. Don't try to be a 'hero' and always question your ability and ability. Judge, don’t feel good about yourself, once you do, you have already lost.”
Jones believes that his strength is detachment, anything that has happened has become the past, and what happened 3 seconds ago has nothing to do with it. What matters is what to do next. Emotionally stay away from the market. If your previous views are wrong, you must revise them in time.
After many years of trading, I have concluded that the secret to success lies not in precise buying and selling points, but in avoiding large losses. You must strictly control your single transaction, single day, and single month from beginning to end. maximum loss.
How can we control the retracement and make a good capital curve?
First, a single loss must be controlled within 2% of the total capital. If there is no profit, a relatively small amount must be set as the stop loss for the first entry. If there is a loss, , the reduced principal is used as the initial deposit for calculation; second, the loss control in a single day must be within 5% of the total funds, and the maximum risk ratio is reached, and trading will be stopped on that day; third, the loss control in a single month must be within 20% of the total funds. Within this period, the maximum risk ratio is reached and trading is stopped for that month.
In short, never turn profits into losses. Only when you know where to stop can you know what to do. Keeping profits is as important as keeping principal. A profitable order should never turn into a losing order; the loss of a single transaction should not exceed the profit of the previous transaction; the loss of a single day's transaction should not exceed the profit of the previous trading day. Once it exceeds, close the position immediately and exit. The best day is No more trading. If you must trade, you need to wait until your emotions return to zero before reducing the amount of operations to the minimum.
After the daily single loss reaches a certain limit, you must first stop trading, calm down, and re-examine the trading plan and the next strategy. Don’t have the emotion of wanting to make it back immediately the more you lose. In terms of ideas and practices, we must truly accept that losses are part of trading, and accept the trading mentality that only small stop losses can win high-probability events.
D. Emotional management is very important
Generally speaking, if you lose money for 3 consecutive days, you should reduce your position, operate a light position or suspend trading; if you lose money for 3 consecutive days, you should reduce your position. Take small positions or suspend trading, reflect calmly, and then operate with small positions.
Jesse Livermore once said: "The vast majority of speculators have a common problem - eagerness for quick results. They do not regard speculation as a serious business, nor do they follow ordinary We operate according to business principles. When we continue to lose money in any industry, we will not continue to invest more, but will only try to find reasons to improve, or close down and transfer." Is this the same for futures? When you suffer losses, you must reduce your expectations, order volume, and frequency, otherwise it will inevitably lead to big losses in a single transaction or in a single day. Especially when you are stuck in a losing streak, the best way is to stop losses and trade immediately, because when the fear of losses gradually increases, emotions will begin to short-circuit people's reason. At this time, you must leave the market immediately and stop emotional operations.
In fact, when trading is not going well, it is the time when traders are tested to quickly adjust their mentality and ability to hold positions. A highly disciplined trader must first withdraw from the market and wait and see when the operation does not go well. When a sudden big loss occurs, he must close the losing position without thinking, and wait until he is completely calm, completely accepted the loss, and his emotions have returned to zero. Make your next transaction.
The correct position must be one that makes you feel comfortable, one that doesn’t matter whether you look at the market or not, and one that allows you to sleep well. Once you feel emotional changes, tension, depression, worry... then you should pay attention to it and close the position at any time.
Positions are an important factor in emotional management and effective execution, and emotions reflect greed and fear in trading. Its impact on trading is more important than technology, and it is also an important indicator of trading. Speculation is a human behavior that makes one feel comfortable and just right. In the market, pain and success are opposites, so if you feel pain, leave the market quickly; if you feel comfortable, continue. In other words, when you make money, it is the right time, so you should continue as much as possible; when you lose money, it is the wrong time, and it is also painful, so you should end it as soon as possible. When emotions appear uncomfortable, it is time to respond decisively. Once the emotions are not right, it is either that the time to enter the market is not mature, or the position is heavy, or it is time to close the position. Correct trading and holding positions must be relaxed and enjoyable. of.
When you are losing money, don’t let any thoughts or emotions come into play. Only stop the loss decisively at the stop loss point set after opening the position; when you are making a profit, when you emotionally want to cash in the profit, let the action of closing the position go. Slow down, let your emotions calm down, find the signal to close the position, and let the system execute it. When entering and exiting the market, you must deliberately avoid being affected by subjective emotions, remember the rules, follow the signals, enter and exit according to the conditions, and always remain calm, alert, and objective.
Written by Jin Lun Feifan