Stop is the necessary trading tips for futures investors. For the novice, many people think that everyone must first go through the process of losing money, and then to reach the other side of success, and lose money is the investors must pay the “tuition.” If this is the case, I hope this “tuition” is best “install payment”, rather than “one-time payment of tuition fees.” After all, many times to lose money experience easier for investors to pay attention to the correct concept of futures trading and methods.
Loss also worth it! There is a more trading idea that the loss caused by the planned stop loss is not a loss, the real loss is planned loss. In mature futures trading, investors are generally only in the expected profit and loss ratio of more than 3: 1 will trade. If you follow this principle to invest in the long term is not easy to produce a loss. In general, the final loss is due to the implementation of profit and loss ratio of 3: 1 set the stop and the resulting excess stop. And this loss is mostly from the so-called sudden stop. Therefore, the control of sudden stop loss as an important means of futures trading success and ability.
From the surface meaning, the planned stop loss is set in the transaction plan set the stop price or condition signal. But from a deeper understanding of the point of view, the planned stop (it can be said that the stop-loss behavior) in the actual operation can be set according to the planned price is executed, the general performance of the market trend with a continuous price and full market liquidity The
Stop loss methods can generally be divided into three categories: fixed stop, track stop and condition stop.
Fixed stop, that is, by limiting the specific stop position, thus fixing the amount of stop loss. Such as 10% stop loss or technical form price stop and so on. This type of stop-loss generally has a clear plan loss limit, can be a good reflection of the profit and loss ratio of 3: 1 principle. This type of stop-loss method is easier to understand, the implementation is also very simple.
Tracking stop, that is, by setting and tracking the relevant stop-loss conditions and signals to complete the stop function. This type of stop-loss generally does not set a specific stop-loss price, the advantage can be combined with the use of trading conditions. As the stop position is variable, so most of the track stop also has the function of tracking only, is conducive to effective expansion of the purpose of profitability. For example: average stop, channel stop, trend line stop and so on. As a result of tracking stop-loss strategy and homeopathic trading philosophy closely integrated, so many old traders are more like to use the track stop. It is a good stop-loss strategy, can help traders to seize the vast majority of a trend.
Conditional stop, that is, by presupposing that the market will appear in certain circumstances, if there is no expected after the situation that is open out. If the information on the fundamentals is published, the information is expected to be bullish, but the published information is inconsistent with the expected, that is open out. Again, if the expected price in a certain period of time should be a change, but did not happen after the expected changes, then open out can also be regarded as a conditional stop. Said the popular point, that is, when the time did not happen, that is, the conditions stop. This method, the general investors less use. And because the method of subjective judgments more ingredients in the use of the best and other methods should also be used together, will be more secure.
In short, there are many ways to stop the plan, but no matter what kind of stop-loss methods must be clear and executable.
Sudden stop loss
A sudden stop loss is a stop loss when the planned stop is not valid, specifically, an unexpected situation, or no continuous price can be implemented, or due to lack of liquidity caused by planned stop-loss obstacles. Loss of sudden loss refers to loss beyond planned stop.
For example, someone in 5000 to do more, plan the target is 5300, plans to stop is 4900, the planned profit and loss ratio of 3: 1. But because of the overnight plunge, the price jumped over its stop-loss to 4700 near the sharp open, making all of a sudden at a loss, after some struggle, or in the price rebound to 4850 near the yuan stop. After the price that is launched a sharp rebound. This is a typical sudden stop. In this case, investors are facing a lot of mental stress, ideological struggle is also very intense. On the one hand the price has hit the stop bit, according to the plan should stop out, and on the other hand because the price is too oversold, the price may rebound at any time possible, if the stop may stop at low, if not Stop, there may continue to fall. All kinds of ideological struggle seriously interfere with the normal decision-making thinking of investors, this time if the price continues to drop, then, at any time may lead to investors to make psychological stop.
In the above example, the person’s loss can be divided into two parts. Ie total loss = planned stop loss loss stop loss = (5000-4900 yuan) (4900-4750) = 100 150 = 250. The total loss per port to 250, almost equal to the original plan of profit 300. Then the profit and loss ratio becomes 1: 1, if long-term operation, investors are difficult to make money in the futures market.
In practical transactions, there are many such examples, especially in the case of emergencies. In addition, the market sometimes because of the dramatic changes in the market makes the skyrocketing, so that investors can not be a normal plan to stop. So effectively avoid or mitigate sudden stop-loss, for investors is very important.
Countermeasures and suggestions
Sudden stop is difficult to avoid, but to some extent we can still through some measures to reduce the loss of sudden stop loss. I believe that to effectively reduce the loss of sudden stop loss, the first is to strengthen the variety of research efforts to understand its characteristics. Second, to carry out a reasonable fund management. Reasonable capital management in addition to ensuring that the account does not appear a malignant loss, but also can reduce the psychological pressure of traders, to stabilize its ability to judge, is conducive to follow-up operation transactions. Third, increase the transaction judgment ability. In the example cited above, the price is in a short-term downward trend, the customer against the rebound when the rebound, not fully aware of the trend of the first half of the closing performance is very weak. This time is not suitable for admission to do more, not suitable for holding a long warehouse overnight. Fourth, improve the trade plan. Good trading plans should sometimes include countermeasures for sudden stop-loss.
For the sudden stop loss, its psychological impact on the traders is great. This requires traders to constantly experience the market changes on their own psychological impact, and from the grasp of the method to reduce panic. In addition, when the sudden stop after the occurrence of psychological recovery is also necessary. The best way to do it is to forget. In the city to do a good job stop, be sure to be good at two forget: the first is to forget to buy the price. No matter what the price to buy, buy immediately after the forgotten their own purchase price, only according to the market itself to decide when to stop according to plan, do not make their own subjective feelings and emotional impact on the implementation of the transaction plan The The second is to forget the stop price, that is, after making a stop immediately forget the stop, do not once bite for ten years afraid of the rope. Should be in the market again when the transaction signal, do not hesitate to act again.
Finally, I would like to emphasize the words of the professionals: “always stand at zero”. As the buy may make the same mistake, the stop will also make mistakes, when found their stop error, to overcome the psychological barriers, once again ran into the forward team.
In short, to use rational and decisive victory over greed and luck, can only long-term with the market counterparts.