Trading is sometimes compared to g@mbling, but it differs in that it involves technical and fundamental analyses such as entry points, stop loss points, R:R profit ratio, and capital management strategy. To build a trustworthy trading system, a trader may only need to win 3 out of 10 trades, but with effective capital management, good R:R, and strict stop loss, profits can still be made.

Stop loss and capital management are crucial components of a trading system. It is important to limit losses and preserve capital before considering future profits. As long as there is breath, there is a chance, and as long as there is money, there is always an opportunity.

Let me introduce a capital management and stop loss method for a trade, using the example of a maximum acceptable loss of 10% per trade. Suppose Account A has $1000. When entering a short BTC trade at $21000 with a stop loss point at $22000, and A wants to manage this trade so as to lose no more than 10% of A's fund, which is $100, what should be done.

  • First, calculate the percentage of loss when the stop loss order is hit at 22000 USD, assuming entry with a volume of 1 BTC at 21000 USD: 22000/21000 = 1.0476 = 1 + 4.76%. This means that the order will lose approximately 4.76% when it hits 22000.

  • Step 2: If you use your entire account to enter the order, you will lose 4.76% of your account balance. Assuming an account balance of A% Account ……………. 10%, A = 10/4.76 = 210% account, which equals 210% x 1000 = 2100 USD. Therefore, 2100 USD is the volume you will use to enter the order after multiplying by the futures. For example, if you bet 100 USD, then with future x21 = 2100. In summary, the volume used to enter the order will be as follows:

  • To lose 100 USD, use 100 / 4.76% = 2100.

  • Similarly, to lose 50 USD, use 50 / 4.76% = 1050. General formula: Volume = Amount of money to lose / ABS(1- Stoploss/entry) - *ABS is the absolute value

Effective management of your capital and controlled losses will lead to stable trading psychology and wise trading decisions based on market insights.