This stems from the way the crocodile swallows: the harder the prey struggles, the more the crocodile gains. Suppose a crocodile bites your foot-it bites your foot and waits for you to struggle. If you try to get rid of its feet with your arms, its mouth will bite your feet and arms at the same time. The more you struggle, the deeper you get.
So, in case a crocodile bites your foot, remember: your only chance of survival is to sacrifice one foot. If expressed in the language of the market, this principle is: when you know that you have done something wrong, it is over immediately! Don't make excuses, expectations, reasons or take any other actions, and leave quickly!
In fact, the trading skills of stock market, foreign exchange market and option trading are similar. Only a few people can fully understand the meaning of "stop loss", so only a few people can make money in financial markets. "Stop loss" is like a sharp knife, which makes you bleed, but it can also keep you alive without hurting your vitality; It can't enlarge your losses, and let you turn passivity into initiative, and keep looking for new hot spots. Surviving in the financial market sometimes requires patience and sometimes confidence, but patience and confidence do not mean luck. Investors who don't know how to stop losses will get lucky. Luck is the natural enemy of stop loss.
Stop loss is the basic skill of speculative art, so we must deeply understand this truth, which also comes from bitter experience. Also in the mid-1990s, a certain gentleman was in charge of managing a small-scale fund in the company, and after obtaining good returns in the stock market, he used the stock market adjustment period to establish a small-scale selling position on commodity futures A ... Soon the price began to rise and reached the stop-loss level. But at that time, a certain gentleman not only refused to accept the loss of 10000 yuan, but continued to build a larger selling position at a higher price. However, prices continue to rise. What shall we do? A gentleman has set up a small position on the news of the price reduction of raw materials. As a result, the news that the product will be reduced in production came out! Every time a gentleman takes rescue measures, the situation gets worse. The crocodile finally had a hearty meal in the market, and extended a gentleman's stop loss 10000 yuan to 80000 yuan, just because a gentleman didn't follow a principle he clearly knew. At the beginning of 1999, when blue-chip stocks started to open positions by mistake, a company relied on stop-loss technology to quickly transfer funds into low-priced large-cap stocks and won a strategic victory.
The above content about stop loss is based on speculative operation, only for the speculative operation stage. Real investment does not need to stop loss in the operation stage. The reason why there are so many stop losses is not to encourage people to actively speculate, but to focus on the reality of the securities market. Can you believe it? You can randomly survey any investor or fund manager. Do they really invest in the stock market? Can their proportion exceed 10%? The answer is obvious!
Investment also has a stop loss, but it is more often called take profit. Investment stop loss is different from speculative stop loss, which is only relative to price change; The change of investment stop loss relative to fundamentals. It is wrong for investors to claim that real investment never needs stop loss, because big investors like Buffett also stop loss. Where can they stop loss? Stop loss when the invested company loses its growth and its fundamentals deteriorate!