Investment rule 1: try to avoid risks and keep the principal;
Investment rule 2: try to avoid risks and keep the principal;
Rule 3 of investment: remember the first and second rules firmly.
Keep the principal, that is, keep the chance to start again. Therefore, learning to stop loss is a compulsory course for every trader.
Stop loss means that when the loss of a transaction reaches a predetermined amount, it will cut the position in time to avoid further losses, with the aim of limiting the loss to a smaller range when the investment goes wrong. In other words, stop loss makes it possible to make a bigger profit at a lower cost. Countless bloody facts in the futures market show that a wrong transaction is fatal enough, but stop loss can help investors save the day. Stop loss is an important means to protect yourself in futures trading, just like the brake device in a car. Only by being good at "braking" in an emergency can we ensure safety. The ultimate goal of stop loss is to save strength, improve the utilization rate and efficiency of funds, and avoid small mistakes leading to big mistakes or even total annihilation.
Stop loss is not only an idea, but also a plan and an operation. The concept of stop loss means that investors must understand the significance of stop loss in futures trading from a strategic perspective. Because in the high-risk market, survival is the first thing, and then we can talk about further development. The key function of stop loss is to make investors survive better. It can be said that stop loss is one of the most critical concepts in futures market investment. Stop loss plan refers to how to make a stop loss plan before the implementation of important trading decisions. The most important step of stop-loss plan is to determine the specific stop-loss position according to various factors (such as important technical position or financial situation). Stop loss operation is the implementation of stop loss plan and an important step in futures market investment. If the stop loss plan cannot be transformed into a real stop loss operation, the stop loss is still an armchair strategist.
0 1
The importance of stop loss-crocodile principle
Professionals often use crocodile principle to explain the importance of stop loss. The original intention of the crocodile principle is: suppose a crocodile bites your foot. If you try to get rid of your feet with your hands, crocodiles will bite your feet and hands at the same time. The harder you struggle, the tighter you get bitten. So, in case a crocodile bites your foot, your only chance is to sacrifice one foot. In the futures market, the crocodile principle is: when you find that your trading deviates from the direction of the market, you must stop immediately, without any delay or luck. It sounds cruel for crocodiles to eat people, but the market is actually a cruel place, and people are swallowed up by it or suddenly disappear every day.
Please look at a set of simple numbers: when your capital has lost from 654.38+10,000 yuan to 90,000 yuan, the loss rate is1÷10×100% =10%; If you want to recover from 90,000 yuan to 654.38+10,000 yuan, the profit rate you need is only1.479×10% =1. If the loss is 75,000 yuan from 6,543,800 yuan, the loss rate is 25%; You need 33.3% to restore profitability. If the loss is 50,000 yuan from 6.5438+10,000 yuan, the loss rate is 50%; You will need 100% to restore profitability. As the saying goes, if you stay in the green hills, you are not afraid of burning without firewood. The meaning of stop loss is to ensure that you can survive in the market for a long time. Some people even say: stop loss = regeneration.
Soros, a world investment guru, said that there is no risk in investment itself, but out-of-control investment is risky. Learn to stop loss and never fall in love with loss. Stop loss is far more important than profit, because at any time, capital preservation comes first and profit comes second. It is quite effective to establish a reasonable stop loss principle, and the core of the steady stop loss principle is not to let the loss continue to expand.
02
Stop loss reason
Stop loss is needed for two reasons.
The first is subjective decision-making mistakes. It is a very important idea that every trader who enters the futures market must admit that he may make mistakes at any time. The reason behind it is that the futures market is random, and the game of tens of millions of people makes it impossible to have a fixed law at any time. The only thing that will never change in the futures market is change. In addition, any law will always fail, and at this time you may meet a smart one. When the probability of failure becomes a reality, or the law fails, we must take a knife to stop the loss.
The second is the change of objective situation. For example, unexpected sudden positive or negative fundamentals, major macro-policy changes, wars, coups or terrorist incidents, natural disasters such as earthquakes and floods, and institutional capital chain breaks. Will lead to an instantaneous reversal of the futures market.
03
Stop loss strategy
One of the two elements of stop loss design is timing and the other is amplitude. As long as either of the two conditions is met, a stop loss is required. These two factors are different for different people, different risk preferences, different varieties and different market stages.
The first condition is that the fluctuation reaches a stop loss. That's to help investors judge possible errors in space, but it is suggested that this quota should be set within obvious pressure or support, otherwise the actual execution quota will far exceed the predetermined quota.
The second condition is time. Time is the most important factor in the market and the most difficult to master. Therefore, investors must characterize the market in advance and find out the length of time allowed from your order to the breakthrough you want. Once the time limit is exceeded, the risk of your position will suddenly increase, so close the position first. Strict implementation of time stop loss can also avoid the problem that the actual stop loss amount far exceeds the predetermined amount.
Relatively speaking, the change of space is more random, and the time structure is difficult to change at zero time. Therefore, of the two, time stop loss is more important and reliable than space stop loss.
When the stop-loss conditions are met, it is not technically necessary to re-judge whether to stop the loss. Since the market has not developed as you hoped, it proves that your previous analysis is likely to be wrong, at least the probability of being wrong suddenly becomes very large. Since the stop loss is the minimum security guarantee for the principal, being lucky at this time means that the proportion of risk and income is seriously unbalanced, and the stop loss is above everything else! In this way, you won't be eliminated because of your inevitable wrong analysis, and you can stay in the market until dawn.
However, stop loss is difficult. In fact, there are many examples of investors setting a stop loss but not executing it. In the futures market, the tragedy of traders being swept out of the house is staged almost every day. Why is it so difficult to stop loss? There are three reasons: one is luck. Although some investors know that the trend has broken, they always want to have a look and wait because they are too hesitant, which leads to a good opportunity to miss the stop loss. Second, frequent price fluctuations will make investors hesitate, and frequent wrong stop losses will leave lingering memories for investors, thus shaking their determination to stop losses next time. Third, executing stop loss is a painful thing, a bloody process, and a challenge and test to human weakness.
In short, stop loss is unconditional-stop loss is always right and wrong; It is always wrong to die, and it is also wrong to be right.
04
Stop loss method
How to set a stop loss? There are the following methods for reference:
1. Balance point stop loss method.
Set the original stop loss immediately after opening the position, and the original stop loss position can be set at a distance of 1%~30% from the opening price. When the futures price rises after buying, the stop loss will be transferred to the opening price, which is your break-even point, that is, the stop loss position of the balance point. Accordingly, investors can effectively establish a "zero-risk" system and cash out some or all profits at any time. After the establishment of the balanced stop loss system, the next purpose is to close the position. Closing positions is highly technical, but no matter what closing position technology is adopted, the stop loss position must be adjusted accordingly with the rise or fall of futures prices.
situation
Investors bought at 2000, and the original stop loss was set at 1950. If the futures price falls all the way after buying, they can stop at 1950 (see figure 1).
Figure 1 One of the schematic diagrams of the equilibrium stop-loss method
If the futures price rises after buying, the stop loss of the balance point is set near 2000 points, and the futures price can be cleared when it falls below (see Figure 2).
Fig. 2 Schematic diagram of equilibrium stop loss method (II)
If the price continues to rise after buying, you can immediately adjust the stop loss position (also called the take profit position at this time). If the futures price rises to 2 100, the stop loss can be adjusted to 2050, the price rises to 2 150, and the stop loss also "rises" to 2 100.
Fig. 3 Schematic diagram of equilibrium stop loss method (III)
2. Time stop loss method.
People generally pay attention to the stop loss of space, regardless of the time factor. As long as the price falls to the predetermined price, it will be cut off, which is the space stop loss. The advantage of space stop loss is that it can sacrifice time to wait for the big market; The disadvantage is that the waiting time is long, and it is often necessary to stop loss, which not only delays time but also loses money. So it is necessary to introduce the concept of time stop loss. Time stop loss is a stop loss technology designed according to the trading cycle. For example, we expect a trading cycle to be five days, and after buying, we will linger on the buying price line for more than five days, so we will resolutely appear the next day. From the perspective of space stop loss, the price may not have reached the stop loss level, but the holding time has exceeded the time limit. In order not to expand the loss of time, it is advisable to go out first at this time.
3. Technical stop loss method.
Setting stop-loss orders at key technical positions can avoid further expansion of losses. There is no fixed model for technical stop loss method. Generally speaking, using technical stop loss method is nothing more than gambling with small losses to make big profits. Its main indicators are: ① the important moving average has been broken; ② The trend line is broken; (3) The neckline position of the head (lower) such as head and shoulder top (lower), double top (lower) or arc top (lower) is broken; ④ The lower rail of the ascending channel or the upper rail of the descending channel is broken.
4. Programmatic stop loss.
It is precisely because of various reasons that when the price reaches the stop loss level, some investors miss the square inch and suffer losses, and the stop loss level is changed again and again; Some investors temporarily changed their minds and increased their positions against the trend in an attempt to put all their eggs in one basket to recover losses; Some investors simply adopt the "ostrich" policy and let it go after the losses expand. In order to avoid these phenomena, programmed stop loss strategy can be adopted. That is, with the help of the pre-designed trading system, the computer executes the stop-loss signal and mechanically operates to buy or sell according to the signal. This is a simple and effective way to help investors strictly implement stop loss at present. This trading system helps investors to develop good stop-loss habits, thus avoiding risks in the market, minimizing losses, turning passivity into initiative and being invincible in the investment market.
05
Misunderstanding of stop loss
1. One of the misunderstandings: stop frequently, and the more you stop, the more you lose.
Most newcomers in the futures market, after suffering losses because they didn't stop the loss in time, will generally learn a lesson and strictly formulate the stop loss principle. However, out of the psychology of "once bitten, twice shy", it is often easy to go to the other extreme because of unfamiliarity with the market, lack of confidence in trading, irregular stop loss, frequent loss, and frequent stop loss.
The harm of this misunderstanding is also great. No matter how big the funds are, no account can bear long-term losses. More seriously, when the amount of funds is getting less and less, investors may gradually lose confidence in analysis and trading, always hesitate between stop loss and no stop loss, and it is difficult to formulate and implement a reasonable stop loss plan. To prevent this from happening, investors should be familiar with market rules and price fluctuation characteristics before trading any variety, and make different stop-loss strategies and positions according to different varieties.
2. Myth 2: Losses can be dragged back.
Once a loss occurs, investors tend to be indecisive, take a chance and give up the stop-loss plan, hoping to "drag" the loss back by delaying and waiting for the market to reverse. Especially when the loss is huge, it will be unbearable psychologically, and I hope to reduce the loss by delaying. This is the most difficult and common psychological misunderstanding in futures trading. In fact, any transaction has the best stop-loss timing and stop-loss position. Once missed, not only can not recover the initial loss, but also may lead to huge losses. Especially when there is a loss in contrarian operation, we should act decisively and strictly implement stop loss. This is the so-called "not afraid of making mistakes, only afraid of procrastination".
3. Myth 3: Stop loss is small, not just big.
Some investors often overestimate their stop-loss ability after having certain trading experience, and fall into the misunderstanding of "stopping small losses and making big losses" in stop-loss. For example, when the loss is within 10%, it can stop loss rationally in time, but it is unwilling to stop loss when the loss exceeds 50%.
Next, let's take investor B in the above-mentioned stock index futures trading contest as an example to see what will happen if he always keeps in mind stop loss or take profit, even if he adopts unscientific Man Cang trading.
situation
Suppose A doesn't take a stop-loss strategy after selling 1 hand IF08 12 contracts at 4500 points, while B realizes that his trading style is radical and the risk is obviously huge after selling five hands of Man Cang IF08 12 contracts at 4500 points, so it is necessary to set up an effective stop-loss scheme to control the risk. So B adopted the balanced stop loss method. Provisions: after entering the market, as long as the futures price rises and loses 50 points, all stop losses will be made; If it falls, the take profit point will move down by 50 points.
See table 1 for the billing results of Party A and Party B after the market closes (the handling fee is omitted).
From the above operation, it is found that if B does not take the stop loss method, it will all be out on July 25; This time, he adopted the strategy of timely stop loss (profit), which made his loss actually smaller than A's, thus saving his financial strength and facilitating subsequent transactions. It can be seen that the important role of stop loss strategy in futures trading is beyond doubt.