Trading with small losses and large profits, the key to ultimately making a profit is that your total profits must exceed your total small losses.

However, there are two issues here:

1. How to ensure that your total profits are sufficient to cover your total losses.

2. Preventing the account from being frequently liquidated due to small stop losses.

The core to solving these two problems is to control the risk well and try to catch larger market trends.

For the first issue,

We know that the amount of profit is given by the market; no one knows how far the market can go. No one can buy at the lowest point and sell at the highest point. What we can do is to hold on as much as possible to let profits run.

But most people let profits run because they often find that the profits disappear or turn into losses while running, so the majority's approach is to set profit-taking targets proactively. However, once you cap the profit side, the ultimate outcome is that the profits you capture from the market trends cannot cover your small losses.

Of course, letting profits run does not mean holding on indefinitely. The core here is to accept a certain percentage of drawdown to let profits run, and there are many methods to achieve this. If you are unsure which method is best, feel free to contact me.

Advertisement

Additionally, you should try to catch larger market trends. Many people prefer intraday short-term trading, and I have always said that it is difficult to make a profit from intraday short-term trading. The most fundamental reason is that it is hard to catch large market trends within a day. No matter how hard you try and how busy you are, in the end, what you earn is not enough to offset your losses and various transaction fees.For the second question,

Many people, before the market trend even arrives, have their accounts continuously whittled down by frequent small stop losses, ultimately leading to a persistent shrinkage of their accounts. In some extreme cases, they may even face a margin call.

Thus, this involves a matter of capital management; you need to control the risks and wait for the right winds, and the best way to control risks is to trade with a light position and scale in on wins and scale out on losses.

What is a light position? For example, each time I set a stop loss, I only risk 1% or 0.5% of my total capital. This means a single loss doesn't significantly affect me, and even if I suffer losses on 10 consecutive trades, it's quite easy to recover by catching a single market trend.

Another strategy is to scale in on wins and scale out on losses. For instance, if your account retracts by 10%, you then reduce your position size by half. If it retracts another 10%, you reduce your position size by half again. This ensures that you never get wiped out while waiting for the market to turn in your favor.

Some might argue that by reducing your position size, you'll earn less when the market trend arrives. This is a trade-off, after all, risk comes first, and profit comes second. Your primary task is to ensure your survival, and only then consider making a profit. At worst, it might just take a bit longer to recoup your losses; otherwise, if you encounter a prolonged series of stop losses, you might not even have a chance to turn things around.

What to do when facing consecutive stop losses?

Some people might add filtering conditions or even give up trading altogether. However, when you stop trading, and a significant market trend suddenly emerges, you would have wasted all the trial and error costs you incurred previously.So, when facing consecutive stop losses, there is another method, which is to control your position size. If your position is very small, then even if you have several consecutive stop losses, what's the big deal if it's just a small loss in total?

You need to understand that the trend of the market is uncertain; you have no idea which entry will lead to a trend. If you add filters to eliminate what you consider to be false signals, you may also filter out potential true signals, and in doing so, you might miss a significant market movement.

What if you don't add filters? Then the only option left is to trade with a light position. When you control your position to be very light, you also control your risk to be very small. By firmly executing once and getting through this unfavorable period, you will eventually wait for the market that belongs to you.

In other words, when facing consecutive stop losses, you can either change your system to filter out some signals, or you can trade with a light position and reduce your position size to tough it out until the market you want appears. These are the only two options available to you.

Of course, I suggest you choose the latter; it's better to make a mistake than to miss out.

Many things, many truths, can be understood after trading for a long time, but society is about who understands first. Understanding early and understanding late leads to different destinies.