Trend-following, stop-loss, take-profit, rules, execution - Web3 cryptocurrency trading platform

I believe that the core elements of a successful trade are: following the trend, stop-loss, take-profit, rules, and execution.

If a trader effectively addresses these five core elements of trading success, and adds appropriate self-adjustment over time, eventually, their mindset will gradually become peaceful—no longer rejoicing over gains, nor mourning over losses, nor anxious due to adjustments.

1. Following the Trend

The first rule in “Twelve Principles of Wall Street” is stop-loss, and I used to think the same.

But now, I believe the first rule should give way to following the trend.

If you cannot follow the trend, your operations will inevitably encounter many stop-losses.

Therefore, following the trend is the most important element among the four key factors of trading.

Following the trend is simple—just four words: “Follow the trend.”

Every trader knows this, and can even spout a bunch of reasons why.

But how many truly understand it? Judging by the reality of most people’s losses, very few actually do.

Whether it’s the overall market or individual stocks, the trend is the “main line.”

The formation of a trend is the result of all factors working together; any influence from other single factors in the stock market can only have a temporary, localized impact on the trend.

Once a trend is established, it can last from several months to several years and is unlikely to change easily.

Thus, trend followers make big profits, while contrarians suffer big losses.

Following the trend is the first iron law of stock trading.

Traders must have their own judgment of the trend; based on this, they can follow the trend.

I now believe that to “follow the trend,” three issues must be addressed:

1. Fix your trend judgment cycle.

Any trend judgment must be based on a certain trading cycle.

Some traders look at 5-minute charts, others at 30-minute, daily, or weekly charts.

Different cycle levels yield different trend judgments, sometimes even contradictory.

Some books say: short-term cycles should obey long-term cycles.

But I now think there is no such thing as who obeys whom, nor is there right or wrong.

The key is: traders must clearly identify the trend judgment cycle that suits their personality, and avoid swinging between long and short.

2. Confirm your trend judgment method.

Judgment requires specific basis; it cannot be arbitrary.

In other words: what is the basis for judging trend reversals? As long as this basis is not met, the current trend continues.

This judgment method must be relatively clear and not overly complex.

Trading is an art, not a science, so there is no “perfect and precise” method.

But we must have a method to constrain and reference.

Regarding trends, three basic principles need to be emphasized:

• The brewing of a new trend takes time.
• It cannot be reversed by a single long bullish or bearish candle.
• Once established, it will continue for some time.
• The progression of a trend is tortuous, not a straight line.

Based on these principles, trend judgment methods often fail in V-shaped reversals.

Because trend progression is tortuous, we should tolerate and accept normal pullbacks or rebounds during trend development.

3. Clarify your response strategies for different trend states, i.e., how to “follow the trend” operationally.

Trends have two states: trending (bullish or bearish) and consolidating.

My main strategy now is: focus on trading trending markets, avoid consolidations.

In the stock market, during a decline, absolutely and unconditionally stay in cash.

For future operations, I increasingly believe I should establish long (or short) positions at historic lows (or highs), then hold patiently until the trend reverses, adopting a big-wave trading mindset.

2. Stop-Loss

No matter how much emphasis is placed on its importance, it cannot be overstated.

The term “stop-loss” sounds uncomfortable, but if you strongly dislike this term, your investment behavior already harbors significant hidden risks—like a ticking time bomb that will eventually destroy your investment career.

Why do we preset stop-loss levels? Because each specific entry and exit decision is based on probabilistic advantage—never 100%.

Or, we can formulate: 70–80% probability advantage + stop-loss = 100%.

I believe that for an investor, stop-loss is an important part of a series of trading procedures—without emotional coloring, even if it means sacrificing a limb, it is natural.

Poor stop-loss discipline can lead to a big loss that wipes out 99% of previous profits, so strict execution of stop-loss is essential for long-term survival in the capital markets.

Learning to stop-loss is a fundamental skill in speculation.

There is a simple trading rule in the American investment community called the “Crocodile Rule”: the more the prey struggles, the more the crocodile gains.

Suppose a crocodile bites your foot and waits for you to struggle.

If you try to free yourself with your arms, its mouth will bite both your foot and your arm.

The more you struggle, the deeper you sink.

Therefore, if a crocodile bites your foot, remember: your only chance of survival is to sacrifice a foot! In market terms, this means: when you realize you are wrong, close your position immediately! No more excuses, hopes, or reasons—avoid any luck-based thinking!

In trading, unwillingness or inability to stop-loss can lead to fatal consequences.

Even in a clear bullish trend, a strong pullback can wipe out your account due to leverage.

Stop-loss is not scary; as long as each stop-loss results in a small loss rather than a big one.

The brilliance of experts lies in risk control + capturing major moves.

It should be noted that:

• Stop-loss is scientific; it cannot be arbitrary.
• It should aim to minimize unnecessary losses.

After all, stop-loss leads to direct capital loss.

Second, successful stop-loss requires accepting mistakes; failed stop-losses must also be accepted.

Understanding stop-loss also means understanding failed stop-losses.

Low-level traders are often resentful and cannot accept successful stop-losses.

Intermediate traders improve and can accept successful stop-losses calmly, but repeated failures in stop-loss can cause strong psychological frustration, even leading to abandoning stop-loss altogether, resulting in total loss.

In reality, stop-loss as a closing operation inevitably has success and failure outcomes.

All failed stop-losses contribute to trading: they ensure that every “successful stop-loss” is executed.

Finally, I want to emphasize that stop-loss is not the goal; the ultimate goal of trading is: to operate without needing stop-loss.

3. Take-Profit

Corresponding to stop-loss, take-profit means abandoning increasing risk in pursuit of profits, and instead harvesting the gains already made.

This differs from the approach of “take profits when profitable.” It involves giving up high-risk profit opportunities based on technical and rational principles—not abandoning all upward potential, nor acting on mere imagination.

If stop-loss is a challenge to fear and luck, then take-profit is a challenge to greed and hope.

This requires traders to have a broad mind, willing to give up small profits later, and brave to harvest the current victory.

In fact, many traders attach great importance to stop-loss but have little concept of take-profit, because in practice, there is a rule: watch your losses, let your profits run.

However, trees cannot grow to the sky; timely take-profit is a necessary skill for traders.

Remember: no matter how heavy the rice, it must be harvested to be valuable; no matter how much paper profit, it must be converted into cash to belong to oneself.

Therefore, take-profit is the last barrier for traders to continuously profit in the market.

While entering and exiting are opposite actions, the conditions for each are different.

The reason for entering must be sufficient, cautious, and confident; the reason for exiting can be simple, vague, or intuitive.

If traders seek fully justified reasons for exiting, trading will inevitably fall into difficulty, making it hard to exit smoothly.

Note that the target price predicted before establishing a position is used to measure reward/risk ratio, and cannot be used as a basis for take-profit.

Even if later, based on market trend, traders propose a second or third target price, these are subjective views and cannot serve as a basis for take-profit or closing positions.

Take-profit must refer to the trend development at that time; when the actual trend changes, traders should abandon previous subjective views and follow the trend.

Only then can profits be maximized with minimal risk.

Thus, take-profit should be flexible, with planned take-profit as a foundation, but its core purpose is to successfully realize profits when market risk increases, freeing up capital.

4. Rules

I often say: you must understand what kind of money you are making and what kind you are losing.

Many traders, once entering the capital market, cannot suppress their impulse to trade frequently.

Overly liberal trading and emotional traits are the root causes of many failures.

So, how to solve this? Only by establishing rules, only by creating a constrained trading mechanism.

Without constraints, operations can become chaotic—“no rules, no square.”

The first benefit of establishing rules is reducing the risk of losses caused by frequent or emotional trading.

Rules, also known as trading systems, should clearly specify:

☆ Entry conditions and position sizing: many books mention trading systems but often neglect position control, especially for traders seeking quick profits, who need to use position control to restrain themselves.

Overly greedy thinking can distort trading behavior, leading to heavy positions and reckless bets.

☆ Stop-loss conditions: if judgment is wrong, you must stop-loss. What is the basis for stop-loss? When should you stop-loss?

☆ Exit conditions: that is, when to take profits.

A trader can have several trading systems to cope with different market conditions, but with one premise: the trading system must be tested over a long period, have a probabilistic advantage, and the trader must have confidence in it.

Currently, I have my own trading system and strategic philosophy—integrating market experience into a quasi-systematic approach based on daily trend swing trading.

Now, I have basically abandoned prediction.

Because I found that as long as I follow the rules, if the market trend meets my conditions, I enter or hold; otherwise, I wait or cut losses.

It’s that simple—I have no need to subjectively predict how the market will move.

Market prediction is the hobby of stock commentators or analysts; excellent traders only follow rules and never make market forecasts.

If you trade against the rules, even if you make money, it is wrong, because luck cannot accompany you forever.

Conversely, if you trade systematically, even if you lose money, it is correct, because in the long run, unwaveringly executing the trading system will make you a lot of money.

Sometimes, the market encourages you to break the rules—for example, if you don’t exit at the stop-loss line and it pulls back, you might feel happy and think it’s okay not to follow the rules.

This plants hidden dangers for the future.

Next time? Will it happen again? It could be a big trap, leading to a major loss.

5. Execution

Undoubtedly, once rules are set, they must be strictly followed.

Otherwise, it’s just empty talk, and rules lose their meaning.

Strictly executing your own rules, with full self-discipline, is a difficult part.

When I first entered the stock market, I was lost in frequent trading, which led to capital losses.

Many friends around me have also lacked sufficient self-discipline, and have been troubled by it.

In the capital markets, the difficulty of execution lies in relying on complete self-discipline and self-restraint.

Because humans are a combination of rational and irrational parts; the irrational side always consciously or unconsciously attempts to undermine rational thinking.

But we must overcome this hurdle and practice strict self-discipline, or we will never join the ranks of successful investors.

This process involves cultivation, requires time accumulation, and continuous psychological reinforcement.

“Cut losses quickly, let profits run!” is a famous Wall Street saying, familiar to all, and the pursuit of every trader.

But in actual trading, many people do: “Run when you profit, hold when you lose.”

The reason is still because they have not established a complete trading mindset.

Not knowing trend judgment makes it impossible to follow the trend; trading against the trend leads to unnecessary stop-losses.

Poor stop-loss discipline can trap you deeply; encountering a big bear market can lead to huge losses, and in futures markets, it can cause liquidation.

Poor take-profit discipline results in riding the roller coaster repeatedly.

Without rules, without a constrained trading mechanism, emotional trading and impulsive chasing of highs and lows are inevitable, and losses become unavoidable.

Having rules but lacking execution power makes everything meaningless.

Only by following the trend, executing stop-loss, adhering to rules, and maintaining execution discipline can you gradually reach the highest level of investment—Wu Wu Wei Wu Bu Wei (non-action, non-doing).

**$VIRTUAL **$ENA $W