Every novice entering the trading market has good expectations. Who wants to experience losses, let alone frequent liquidations, which are endless nightmares? From the initial 5,000 yuan to 1,000 yuan, from one liquidation to several consecutive liquidations, from opening the first trading account to opening more than a dozen... This series of experiences makes traders feel frustrated, helpless, and even want to give up.
However, although it is painful to blow up a position, in the world of trading, no one can escape paying tuition fees. Not only do you pay for lessons and experience, but you also have to pay for trading losses. To turn trading into a continuously profitable career, you must pay this tuition fee.
Just like running a business, you need capital, and then you can make a profit through operation. The market will never let you learn lessons for free. The key is that you are responsible for your own tuition. Trading is different from gambling. Every mistake is for improvement, to build a robust system, rather than blindly seeking to make a profit. So, how to get out of the nightmare of frequent liquidation?
Step 1: Calm down and take a break
After a trader's position is liquidated, there are usually two reactions. One is to take a break, adjust the strategy and mentality, and prepare for the next time. The other is to lose control of emotions and try to quickly win back the losses by increasing investment. If you belong to the latter, although your courage is commendable, being too impulsive may put you into a vicious cycle of continuous liquidation.
A margin call means that something went wrong with your trade. At this point, you need to find out the root cause of the error instead of acting hastily. Pause trading, calm down, focus on analyzing the problem, and prepare a sufficient safety cushion for the next trade. It is recommended to take a break for at least three trading days, which is enough time for you to calm down and reduce the risk of trading again.
Step 2: Review the transaction history and find out what went right or wrong
When you stop trading and clear your positions, you can start to review your past trading history and find out where the problem lies. This is not an easy task and requires patience and deep thinking.
First of all, don't limit yourself to a single problem. Not only should you examine the problem of stop loss, but also see if there is a wrong profit-taking strategy. Sometimes even if you make money, you may be on the wrong path.
Secondly, we need to analyze from multiple angles when reviewing. We need to think about the problem from multiple angles, both vertically and horizontally, to find the root cause of the problem.
Finally, try to find out the influencing factors. Don't just limit yourself to factors such as win rate and profit-loss ratio. Take all factors that may affect the transaction into consideration, which will lay a more solid foundation for future transactions.
Step 3: Learn to reduce risk from trading
When you are ready to re-enter the market, be sure to reduce your risk. For example, if you previously risked 4% of your account balance, you should now reduce it to 2% or less. Similarly, reduce your trading frequency from ten trades per week to five or even less.
Remember, your trading capital is the amount of money you can afford to risk. Using a smaller amount when reopening your trading account will reduce your stress and also help you achieve better trading results.
In short, every trader needs to go through some costs, which is the tuition fee of the market. The importance of keeping a trading journal cannot be overemphasized. It helps you to stay disciplined and learn valuable lessons even in the bitter experience of liquidation. It is a long road to growth to get out of the nightmare of liquidation, but it is also the only way to trading success.
