Find saving grace before you suffer from loss

Once you are in a certain position, the market will determine you are right or wrong. The only way to judge whether you are in the right position in the market is to prove it with profit and loss. The success or failure of trading is determined by the outcome, and trading logic as well. The criteria of trading comes from your perception of the market pattern and trading logic, which is the most direct manifestation of the pattern view.

Traders with a winning rate more than 50% use the risk-reward ratio. A 1:2 risk-reward ratio means that the distance between the buy point and the limit point is twice the distance between the buy point and the stop loss point. This is an evaluation and measurement that must be carried out before the transaction. Many traders think that the higher the risk-reward ratio is, the better, but it is not. In real trading, the risk-reward ratio is set by combining the trader's trading style and strategy.

Short-term traders should set the risk-reward ratio at 1:1 or even lower; mid-term traders should set it at the middle level, generally 1:2, 1:3; while long-term traders have longer positions with low trading frequency. You can set a higher level, which generally exceeds the 1:5 level.

Therefore, traders must set the risk they can bear before entering the market. Once a trader loses 50% in profit, he must reach a 100% profit in the next trade to recover the loss. If the loss reaches 80% or 90%, he must earn 400% or 900% accordingly, which is a devastating blow to the traders assets.

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