Many friends have told me to talk about stop loss. I've mentioned stop loss in my previous content, and today I want to refine it a bit. This involves the transformation of a bullish and bearish mindset. Let's first discuss the relationship between stop loss and margin call today.

Why is it important to switch between bullish and bearish thinking in time? This is a common mistake in trading where we believe that because something is in a bull market and keeps rising, it will continue to rise indefinitely. We might even be influenced by news or opinions from other traders.

We might think it will rise by a certain amount, or we might have our own ideas about how it will perform. And when it's in a bull market, the data is certainly very positive. However, once it's about to break through a key level, our bullish and bearish thinking must immediately shift.

To put it in the most common and straightforward terms: we should go where the overall trend is heading, rather than just believing it will rise or fall. This is very, very dangerous.

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Let's look at this chart, which is the daily candlestick chart of the British pound. It shows the market from July 2013 to 2015. It roughly rose from around 1.4 to 1.72, an increase of nearly half a year.

When looking at this chart, I'm sure everyone was bullish at one point, right? In the middle, if there were short-term traders, they might have also gone short in such a small range, and that's okay.

Let's set that aside for now and talk about the bullish mindset. When should we switch? We can draw a psychological support line. Some people might say that breaking below the previous level is also fine, okay. Regardless of which point occurs, you should immediately change your mindset. You'll know that the market has entered a bearish phase, and at this point, the bearish trend has already begun.

Many friends suffer huge losses when trading because of their stop loss. This is due to loss aversion; they don't want to be stopped out, especially when they see the loss amount in the thousands of dollars, tens of thousands of dollars, and feel that they can't bear it.

You can refer to my previous courses on how to adjust your mindset, how to control your position size, and how to manage your funds. Today, let's first talk about how the mindset should be transformed.If one of your short positions has reached this point and you haven't set a break-even stop loss, or even after I've pulled the break-even stop loss and it's about to be hit, I think it's a pity. What if it goes up? I might move the stop loss down first. Is there a possibility for that?

All the little buddies have experienced this. I would lower my stop loss, or even adjust it back, and I've even adjusted it back to the original size.

The profit from this part is completely gone, and it will knock you out. So, how should we place our stop losses? In fact, the simplest and most learnable method for placing a stop loss is what? Key levels.

If you are a beginner with a relatively small amount of capital, and if your position is heavy, it is necessary to protect your profits in a timely manner. If you made this trade here, then place the stop loss here.

Because it has broken through the previous high, I place the stop loss here. As long as it retraces to the previous high and does not go back, it proves that it will not rise for the time being, and it may come down. This part might knock you out, but your profit is secured.

Never, ever move the stop loss casually. The break-even stop loss is also placed at key levels. Why is it called a key level? If you want to protect your profit, place it below the previous high with a gap, especially leaving a little room to secure this profit.

If I want to see whether it can be converted into a short position, it should be placed at a key level.

For example, if it breaks through a certain line, it will definitely turn into a short position, rather than thinking it will come back, I move it down to the bottom, and then I can't, I think it will come back, I move it to the bottom, moving the stop loss arbitrarily will only increase your losses step by step, and the final result will be a margin call and then depositing funds again.

This is very dangerous, so when we trade, we should not make this kind of mistake. Once the stop loss line is set, do not move it lightly.

And if the break-even stop loss is adjusted and you want to protect your profit?When the price is about to reach your break-even stop loss, do not touch it. Some students may ask me, "Teacher, why am I so unlucky? Why does it always hit my stop loss line and then immediately bounce back, just after hitting the stop loss line?" Why is that?

There is no answer to this question, why is it called unsolvable? Because there are multiple possibilities. First, it is possible that the position where you place the stop loss is simply not correct. You should place it above the previous high, I would place it here, I must place it above the previous high, I am shorting, and I still place it above the previous high, or I just put it here, then it is highly likely that you will be stopped out.

Then someone might say, "Teacher, I placed it fifty points higher, and it still stopped me out." That's normal.

When breaking through a key price level, sometimes it's just a shadow line, not a solid body that closes above it, it's just a shadow line that stops you out, so what do you do? Adjust your mindset and look for the next good key point to enter again.

Do not dwell on this issue, saying how unlucky I am, the market seems to be against me, as if my stop loss line will definitely go in the opposite direction once it is hit. If you always dwell on this issue, then trading is not suitable for you.

So the importance of stop loss is that it allows us to have how many times in the market, with our limited funds, to try and test whether our trading system is established, the importance of stop loss is directly related to blowing up the account.

I believe that although it is trading, no one likes to blow up their account, right? I mentioned the types of blow-ups earlier, we need to go through several types of blow-ups, in fact, the types of blow-ups are also our dimension improvement, which type of blow-up you are experiencing now, your dimension is up to which dimension.

Every time you blow up, you can ask yourself, which type of blow-up am I in now, what should I change? Is it that my stop loss is not placed correctly? Or is it that my stop loss is too large or too small? Or am I casually moving the stop loss?

That's all for today's content, everyone is welcome to follow, like, and share!