Do you dare to stop loss?

Stop loss is difficult, but what exactly makes it difficult?
I don't know if anyone has encountered the same problem. Everyone knows that stop loss is very important, but when it comes to the crucial moment, it's just hard to take action!

A very important aspect is the psychological factors at work, first of all, the fear of admitting defeat, once the position is opened, the heart is full of expectations, looking forward to the market reversal, looking forward to profits, stop loss means admitting their judgment mistakes, which is difficult for many investors to accept, so we choose to be patient, expect a miracle, but often wait for greater losses.

Secondly, there is the mindset of greed. When there are losses on the books, we always think to wait a little longer, hoping to break even or even make a profit. This greedy mindset makes us blind to risks and causes us to miss the best stop loss opportunity.

Furthermore, there is a mentality of taking chances, "Let's wait a bit longer, maybe the market will reverse," this kind of mentality is quite common. We often overestimate our ability to predict market reversals, while the market is ruthless and will not change its trend because of our wishful thinking.

The above three points are mainly psychological. On the other hand, they are influenced by cognitive biases, which manifest in two ways: first, excessive confidence in market predictions. Many investors believe they can predict market trends, and thus set stop loss levels based on their predictions. However, the market is complex and uncertain, and our predictions are often unreliable.

The second is the sunk cost fallacy. The time, energy, and funds already invested make it difficult for us to give up. We always feel that since we have already invested so much, holding on a little longer might recover the losses. However, sunk costs are irrecoverable, and continuing to invest will only increase the losses.

Another main aspect is the lack of a clear trading plan and discipline. Ordinary traders generally do not have a clear stop loss strategy. Many investors do not have a clear stop loss plan when entering the market, or even if they do, it is very vague. As a result, it becomes difficult to decisively execute the stop loss during market fluctuations.

Additionally, there is a lack of discipline. Even if a stop loss plan is established, it is difficult to strictly implement it in practice due to the influence of emotions, which makes the stop loss level essentially meaningless.

Overall, the inability to implement timely stop loss is mainly due to psychological factors, cognitive biases, and a lack of a clear trading plan and discipline. 90% of people do not lose to technology, but to their own inability to take decisive action. Next time you consider holding on, ask yourself whether it's faith or the weakness of not daring to admit a judgment error.

‍#加密货币 #交易心理 #止损策略