How Do You Handle a "Wrong Trade"?

Right Trade

I've heard some trading gurus say that trades can be divided into "right" and "wrong" ones, where a profitable trade can be wrong and a losing trade can be right. How do you define a "wrong trade"? What's the most memorable wrong trade you've made? What was the outcome? And what did it teach you for your future trading? I hope some of the experienced traders can share their insights. Thank you\!

Trading is a matter of right and wrong.

To explain this, we have to go back to when we first started trading. From the moment we get interested, to depositing funds, to making our first trade, and before we get "schooled" by the market, all of our trades during this period are neither right nor wrong. It doesn't matter if you doubled your money or lost it all. Most of these trades are based on one or two indicators, a tip from the person who got you into it, or simply trading on a whim. There's no right or wrong in this.

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After getting "schooled" by the market, we reflect deeply and begin the learning process. From simple indicators to great works on Elliott Wave, Dow Theory, Gann, Turtle Trading, and Livermore, this is when the concepts of right and wrong slowly begin to form.

Once you've learned to a certain extent, your trading will inevitably be a mix of the best of each approach, your own understanding, and a small amount of spontaneity.

This is the learning phase, and trading is starting to get on the right track from a more casual beginning.

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This is where a **trading system** starts to take shape. At this point, trading officially has a clear distinction between right and wrong. Every trade made in accordance with the system is considered a **right trade**, while every trade made outside of it is, without exception, a **wrong trade**.

At this stage, a wrong trade that makes you money is the biggest killer. For example, your system dictates a stop-loss, but as the price approaches it, you move the stop-loss further away, and the market happens to reverse. This trade, instead of being stopped out, ends up being profitable. From your perspective, this is as wrong a trade as can be. It makes you lose trust in your entire system, even though your system is the core of your trading—the culmination of countless hours of reading and thinking. This single trade undermines your trust, mocking all the thought you put into it. In the long run, you'll lose this trust, and your trading will revert to the chaotic state of a beginner, with your account shrinking or being wiped out by a single market move.

So, what is a **right trade**?

It's a trade you make according to the system you've built from what you've learned, summarizing and refining your ultimate understanding of the market. But what if this system doesn't make money, or even loses money, over the long term? Is it still a right trade? The answer is still yes. A losing trade can prompt you to re-examine your system, recognize its flaws, and modify it, which in turn improves your understanding of the market.

Slowly, you'll establish rules for when to enter, when to stop out, when to take profit, and when to add to your position. Trades within these rules have a certain probability of being profitable or losing. At this point, even a losing trade is a right trade. Although you lost money, your system has already calculated how many such losses you can withstand while keeping your capital safe. Your foundation remains intact.

So, as the original poster said, a profitable trade can be a wrong trade, and a losing trade can be a right trade. This is completely correct. When you find yourself in a "wrong trade," if you realize it, close the trade as soon as possible. If it's a profitable wrong trade, you should mentally give yourself a slap on the wrist. Consider it the price you pay for doing something wrong. If it's a losing trade, there's no need for that—the market has already taught you a lesson.

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The statement, "A profitable trade can be a wrong trade, and a losing trade can be a right trade," is absolutely correct.

However, many novices don't understand this. Some even scoff, asking how a profitable trade could be wrong. "You're just being fussy\!" they'll say.

This gets back to the definition of a "wrong trade." Generally, it refers to any trade that doesn't align with your trading principles, regardless of whether it's profitable or not.

If you're a beginner who hasn't yet built a complete trading system or set of principles, then there's no such thing as a "right" or "wrong" trade. For you, a profitable trade is right, and a losing one is wrong.

But experienced traders know that a single trade's outcome means very little. What matters is having a **probabilistic edge** and maintaining **consistency** in your trading. The outcome of a single trade can be random, but over the long term, if you trade with a consistent, probabilistic edge, the random individual results will inevitably lead to an overall profitable outcome.

That's why consistency in trading is so crucial. To ensure this, you must set up your own trading principles.

When you have a trading system with a positive expectancy, you understand that if you follow your principles, profitability is just a matter of time.

So, do you need to establish trading principles even if you haven't built a profitable system yet? The answer is a resounding yes. Only by trading with consistent principles can you identify a system's strengths and weaknesses, allowing you to continuously optimize it and eventually build a truly successful one.

What should your trading principles include?

This varies from person to person. Everyone's trading philosophy, system, personality, and habits are different, so you need to create principles that fit you.

However, **position sizing** and **stop-loss** are essential.

I have four main trading principles that I'd like to share with you:

1.  **Stop-loss** (70 points, by proportion), **position sizing** (2.5%-3.5% of capital), and **risk-reward ratio** (3:1).
2.  **Trade with the trend** (with exceptions: high-win-rate counter-trend trades should have a halved position size).
3.  **Wait for the market to invite you in** (based on technical analysis and observable facts, not imagination).
4.  **Align with expectations, execute a full strategy, and avoid mistakes**.

I will not participate in any opportunity that doesn't meet these principles.

Sometimes a market move looks promising, but the entry is unsafe or the stop-loss is too large—I'll firmly stay out. Sometimes the win rate is high, but the risk-reward ratio is only 2:1—I'll still firmly stay out. And sometimes I feel an opportunity is emerging, but the market's movement doesn't align with my previous expectations—I will definitely stay out.

If I ever make a "wrong trade" due to a special circumstance, I'll assess the specific mistake. If the stop-loss is too large, and I realize the error, I'll immediately reduce the position size to bring the single trade's loss back in line with my principles. If I discover the risk-reward ratio is wrong but I'm already in a floating profit, I'll immediately set a break-even stop-loss. If I'm in a floating loss, I'll immediately exit the trade with a stop-loss.

In short, as soon as you realize you've made a "wrong trade," you should exit as quickly as possible.

The most memorable mistake I made was two years ago, trying to short the euro at what I was confident was a bottom. Because I was so confident, when the market eventually broke my entry signal, I selectively widened my stop-loss. The more confident I was, the less willing I was to admit I was wrong. The final outcome was a 10% loss of my total capital on that single trade.

For some, a 10% loss might not be a big deal, but for me, it was an unforgivable mistake. I have a hobby of enjoying a little wine, so to punish myself, I didn't drink a single drop for a month.

As for what it taught me for future trading, it was less a new revelation and more a reinforcement: Since that day, I have never made another mistake with my stop-loss.

First, you have to define what a wrong trade is. In short, it's any trade that doesn't align with your **expectations**, not necessarily one that ends in a profit or loss. While the article repeatedly emphasizes that you shouldn't trade with a predictive mindset, you must have expectations. For example, you expect the price to break out, you expect it to reverse, or you expect a certain level to be resistance or support. Your expectations are your trading logic; they are how your technical system interprets the market. If the market moves as you expect, your judgment is correct, the price action is valid, and you can stay in the market. If the market doesn't move as you expect, your analysis and judgment are wrong. The basis for your entry is gone, and staying in the market becomes a gamble. You need to leave the battlefield decisively.

We all know that in trading, nine out of ten times, you'll lose, but "leek" traders think they're winning nine out of ten times, and then a single, huge loss wipes them out. This is because these "leek" traders use the profit or loss of each individual trade as their only metric. They believe that a losing trade that they hold on to until it becomes a winner is a correct trade. This mindset is incredibly naive. After you enter a trade, if the market doesn't move as you expected, your trade is wrong, regardless of its profit or loss. For example, you think the market will pull back from a resistance level, so you enter a short position there. But the price breaks through the resistance and shows no sign of pulling back. You are wrong and must stop-loss immediately. Or maybe you think the price will break out quickly, so you enter a long position. But after a small breakout, the price enters a consolidation phase. You are also wrong, and you should exit immediately, even with a small profit. It doesn't matter if it has a huge breakout later; your reasoning for the trade is gone.

Trading is nothing more than two actions: buying and selling. When you hold a **right trade**, you must be good at buying—not only should you hold your initial position, but you should also look for opportunities to add to it. When you hold a **wrong trade**, you must be good at selling—you must decisively eliminate all potential for further loss before your account suffers significant damage. As *The Market Wizards* says, until the market proves our trade is right, we must assume it is wrong. You should evaluate a trade's correctness from both a **time** and **space** perspective. See if the market moves in the way you envisioned within the timeframe you set. If it doesn't, your trade is wrong, and you must continuously reduce your position or cut it entirely. Beyond this, you must abandon all wishful thinking. Only then can you ensure your account's long-term survival in the market.

There is a major dividing line in trading philosophy: **prioritizing expected profit** versus **prioritizing risk control**. The former's goal is to make fast, large profits, treating losses and risks as accidents that they were just unlucky to encounter. The latter's goal is to ensure their account's survival in the market, seeking only a relatively low expected profit and strictly controlling losses. They see a huge profit as a pleasant surprise they were lucky to get. The former tends to use heavy leverage, hold onto losing trades, and trade frequently. When they profit, it's like a flood; when they get a margin call, it's like a bolt of lightning. The latter operates with light leverage, uses strict stop-losses, and trades infrequently. Their profits are like a steady stream, accumulating over years. Even with a loss, it's a minor inconvenience that barely stings.

The trading market never lacks stars; it lacks **survivors**. Therefore, the first goal for every trader should be to survive in the market, and only then to achieve consistent returns. However, many common mistakes act as roadblocks to this goal. Today, I'll list some common errors and their solutions for those who are interested.

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**Mistake 1: Overthinking**

This is an absolutely common mistake for traders, especially beginners—they overthink everything. Many tend to believe that trading is overly complicated and are always worried about entering at the wrong time.

Solution: **Stop overthinking**.

Once you've reached a certain level of trading proficiency, you can begin to develop your trading plan and start trading.

At this point, your job is simple: stick to your method, ignore all outside influences, and don't second-guess your trades.

**Mistake 2: Overtrading**

Overtrading is the exact opposite of overthinking. Overthinking usually means you're too hesitant to trade. Overtrading, however, usually comes from **not thinking enough**.

This indicates you haven't spent enough time learning about trading, haven't learned how to create an appropriate trading plan, or you're too greedy and lack the patience to wait for your trading edge to appear in the market.

Solution: **Understand that making money doesn't equal more trades**.

The best way to solve this is to understand the problems overtrading can cause and to realize that more trades do not lead to more profit.

**Mistake 3: Taking on too much risk**

Taking on more risk than you can handle mentally is fatal to trading.

If you take on too much risk, your mental pressure will be immense, and its effect on your trading emotions is not to be underestimated.

The more volatile your trading emotions are, the less likely you are to make a correct judgment, which leads to a vicious cycle and a predictable trading outcome.

Solution: **Carefully assess your financial capacity**.

Especially for beginner traders, start with a small amount of capital. This will give you a more relaxed trading experience, allowing you to get familiar with and adjust your trading strategy. Never act rashly; don't bite off more than you can chew.

**Mistake 4: Chasing a rally/dip after missing a signal**

This is another common mistake traders make. They'll rush into a trade after a signal has already been fully absorbed by the market, always wanting to catch the "last train."

The reason for this is often because they regret not making a trading decision sooner and want to make up for their inner regret.

Solution: **Wait for the next opportunity to arrive**.

We have a saying, "A good horse doesn't eat the grass it has left behind." The same goes for trading. The regret of missing a trading opportunity is just a feeling. The regret of chasing the market will be a tangible loss.

The choice is obvious. Therefore, after missing a trading signal, you should calmly analyze why you missed it, learn from the experience, and be ready for the next opportunity when it arrives.

**Mistake 5: Focusing too much on news and other external data**

Some top traders believe you shouldn't pay too much attention to the news.

Because in today's internet age, you can always find information and even "evidence" that can refute your trading thesis.

But truly successful traders ignore external factors and focus on their own trading edge.

Solution: **Ignore most news**.

The more news there is, the more it can influence your trading decisions. Therefore, you should stick to your own trading strategy, find your edge, and execute it. There's no need to over-analyze the influence of news.

If you're a trader who relies on various indices, news, and feelings to trade, then you're more of a gambler.

**Mistake 6: Not getting enough knowledge/education before real trading**

All traders who don't take the time to learn about the asset they're trading are just speculators.

Believe me, effort is proportional to reward in most cases. If you're unwilling to put in the effort to learn trading, it just means you're treating the market like a casino. Even if you make some money, it's just luck.

Solution: **Invest in yourself and your trading education**.

In my opinion, you need to start with the most basic knowledge. Learn how to read charts, understand basic entry/exit rules, and study fundamental trading strategies.

Only with enough trading knowledge can you earn the right to build your own trading strategy. "Live and learn." Knowledge will prove its importance at the most crucial moments.

The so-called "wrong" in trading is difficult to define because a different way of attributing cause will lead to a different understanding. It's not easy to quantify a mistake itself. Of course, if you work backward from the result, a mistake is easy to identify.

I remember at the beginning of the year when the domestic pandemic hit. As soon as the news of the Wuhan lockdown came out, I judged that the virus was very serious. I figured the market would often overreact, and even if the pandemic was quickly contained in the end, the initial sentiment would be very bad. So, I decisively took a heavy short position on the Hang Seng Index.

In the last few trading days before the Chinese New Year, the market did fall as expected, and my floating profit quickly increased. I held the position over the holiday. When the market reopened after the holiday, the number of new cases was still increasing, so I continued to wait. Although the peak of new cases came soon after, the market's expectation of a reversal came even earlier. The market began to rebound before the number of new cases had even peaked. I thought that if the market overreacted to the bad news, it would also overreact to the expected reversal. So, I took my profit and exited the trade, making a little over 60%. At the time, I thought I was very clever.
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But this time, I overestimated the bulls. The rebound lasted only a few days before the market consolidated. As I waited, the overseas pandemic started to spread, and the bears came roaring back. At that time, I thought that if a developing country like ours could contain the pandemic, then resourceful developed countries would surely be able to handle it, too, so I didn't dare to short again. Later, as I watched Western countries fall one by one, I knew the "I missed out on two hundred million" story was happening again. The bears were merciless, causing the Hang Seng Index to fall another 18%. This was much more violent than the first drop of less than 9%.

Looking back, although I made money from my short, I only ate the fish's head and threw away the delicious body. This was a complete failure.

In reality, from a time and space perspective, these two waves of decline were a classic case of market overreaction. This can be seen from the multiple circuit breakers and record-breaking drops in the U.S. stock market, the largest since the Great Depression.

In fact, market overreaction is the most common and impactful behavioral finance phenomenon in the financial market, repeatedly confirmed by many domestic and international financial scholars.

Specifically, market overreaction is caused by the systemic cognitive biases of investors under uncertain conditions. When faced with a sudden or unexpected event, investors tend to overemphasize immediate information and underestimate past information, leading to an over-rally or over-dip in prices. Once investors understand the true significance of the event, the price over-rally or over-dip will reverse, eventually returning to the rational intrinsic value range.

Academic research points out that investor overreaction can be boiled down to one reason: **incomplete information**. Therefore, as an investor, to avoid this overreaction, the key is to solve the problem of incomplete information when making investment decisions. The solution is self-evident—**investment research**. In simple terms, as a trader, you must have your own trading system so you can make the most of the market's overreaction mechanism.

Thank you for the invitation.

First, we need to define what a **wrong trade** is. To put it simply:

A trade that is **not placed according to your trading standards is wrong**, while a trade that **is placed according to your standards is right**, even if it results in a loss.

Why do I say this?

A planned order may result in a loss because the system isn't perfect, and that's completely normal. Without losses, how can you summarize and optimize?

However, if a loss is caused by an unplanned trade, all the skills you've learned are useless. This is because the problems that arise from wrong trades are **variable**, while the way to handle them is **fixed**. This creates a contradiction that makes it very difficult to get out of the rut. I hope everyone understands this\!

Now, let's get back to the question. "How do you handle a 'wrong trade'?" Experienced traders will try their best to avoid being in the situation of a "wrong trade" in the first place.

A trader with true **execution discipline** will cut a "wrong trade" the moment they discover it, without hesitation or a shred of luck-seeking mentality. As for traders who don't yet understand what a "wrong trade" is, they don't know how to handle it. It's difficult to teach them because some haven't even realized the problem. They just think that profit is right and loss is wrong, lacking the awareness of account consistency. These traders will have to learn this lesson themselves through their trading.

So, some of you may not understand this response, but remember my definition of a wrong trade. As you slowly come to understand it, you'll know what to do.

Correct and incorrect often represent the relationship between truth and falsehood. In the trading market, correct means profit, and incorrect means loss. Therefore, investors often develop a reverence and longing for correctness, while trying their best to avoid even a small mistake. This is why the idea of judging trading proficiency by the ratio of correct to incorrect trades is so popular in the futures market. However, I believe that understanding right and wrong in this way is meaningless and very incorrect for trading. The proper way to understand right and wrong should be considered from the following aspects:

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2.  **Timeliness**. In addition to being highly relative, right and wrong also have strong timeliness. Any trade, whether it's profitable or not, has a valid time window. Beyond this window, what was once right or wrong will reverse. This is especially evident in the stock market, where investors who get stuck often refuse to stop-loss due to hope and are forced to hold long-term, waiting for the next profitable cycle. However, in the futures market, due to margin requirements and delivery limits, investors cannot hold positions for the long term and are often forced to exit at a loss before the profitable period arrives. The timeliness of right and wrong has led to the study of time cycles, which has formed a specialized **cycle theory**. This allows investors to grasp the market not only from a price perspective but also from a time perspective, taking their trading to a higher level. The importance of time cycles can be compared to the importance of price. We can use the analysis of time to judge whether the market is in a bear or bull state, or if it is about to reverse, etc. Naturally, time cycles can be long or short, depending on the scale and level of trading you do. For short-term trading, the cycle is short, while for long-term trading, it's long. As an investor, by analyzing time, you can determine the current state of the market, establish your trading direction, and judge whether you are right or wrong.

3.  **Continuity and Inseparability**. Trading itself is composed of wins and losses, of right and wrong. There is no trading that only has wins or losses. In trading, right and wrong are continuous and inseparable, and this continuity doesn't mean consecutive wins or losses. Instead, right and wrong appear alternately and will always do so. At the same time, right and wrong are inseparable, like the two sides of a piece of paper. No one can always profit or always lose, and no one can separate profit from loss. Only when you truly understand that losses are a normal and inevitable phenomenon can you maintain a calm trading mindset and avoid the fear of the market that prevents you from trading according to your plan.

If you enter a trade and it gets stuck, is it wrong? I believe that as long as it hasn't hit your stop-loss, the trade is still in a correct state. If you make 10 points of profit on one trade, is it a right trade? This depends on how big the market move was. If the move was 100 points, then I believe this trade was still wrong. Right and wrong cannot be judged by profit or loss. They should be judged by the **quality of the profit or loss**. Making only a small loss when you're wrong and a big profit when you're right is correct. Otherwise, it's wrong. The criteria for judging right and wrong is really about **how to set your stop-loss** and **whether you strictly follow it**. How to set a stop-loss is a personal matter, but strictly executing it is a discipline everyone should follow.

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2.  **Allow for mistakes**. If you don't allow yourself to make mistakes in trading, your trading will either be overly cautious and tense, making it difficult to maintain a balanced mindset, or you'll refuse to admit your mistakes when you make them, leading to a huge disaster. Both are major trading taboos. Losses are a very normal part of trading. You should see a moderate loss as the necessary cost to make a profit. Opportunities are found, not seen at a glance. It's an illusion to think you can succeed without paying a price\! Only when you allow yourself to make mistakes will you have more trading opportunities, eliminate your fear of the market, and truly be able to seize profitable opportunities and hold onto positions for long-term profit. Making a trading mistake isn't scary. What's scary is not sticking to a right trade. That's the most terrifying thing\! 3. **Follow the discipline and execute your standards**. Following your discipline and strictly executing your own standards for right and wrong is a prerequisite for correcting mistakes and making a profit. Once you're in a trade, the only thing you need to do is use your criteria to judge whether to exit or hold. Once the price hits your stop-loss, the only thing you can do is exit. Otherwise, you should hold until your criteria give you an exit signal.

Simply put, the direct purpose of trading is to make money.

We know that money can be obtained through honest and upright means, or through dishonest and shameful means. The final result may be the same, but the methods of obtaining the money can be vastly different. This is like a heart surgeon and a drug dealer both making a lot of money. Can they be respected in the same way? Of course not.

The same principle applies in the trading world. Many beginner traders don't realize that it's possible to profit in the market in the **wrong way**.

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Take those who don't stick to their protective stop-loss on a certain position. They may end up making money on that trade, but they don't know they have committed a crime against themselves, and punishment will follow. They've tasted the false sweetness of a wrong success, and the market will, sooner or later, reclaim that undeserved profit. The next time they are in a trade that triggers a protective stop-loss, what do you think they'll do? They'll ignore the stop-loss again, of course.

Making money in the wrong way reinforces bad habits and irresponsible behavior. Once a trader tastes the success that comes from a wrong approach, they will almost always repeat that mistake until that wrong approach smacks them down and takes back the money earned in the wrong way, and even more.

Professional traders are not interested in getting lucky in the market. They don't pursue, hope for, or enjoy profits that come to them despite their mistakes or wrong trades. Truly profitable traders know there are no final gifts in the market.

Right actions and right methods won't always generate profits for an honest trader, but one thing is for sure: repeated wrong actions will eventually lead to the demise of a lazy trader.

This is why we say that money earned by luck will always be lost by skill.

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How you view "luck" is important because it's a hurdle every investor must face and can even directly determine what strategy an investor adopts.

It's so important that both super-investors like Howard Marks and short-selling geniuses like Nassim Nicholas Taleb put a great deal of emphasis on it.

In his book *The Most Important Thing*, Howard Marks divides investors into two categories: The "I Know" camp, who believe the future can be predicted, so they build their investment portfolios based on their predictions and confidently await the results.

The other is the "I Don't Know" camp, who believe the future is difficult to predict and that investment success is heavily influenced by luck. Because of this, they believe they can't predict the outcome of a single bet. They focus on finding a local edge and creating multiple betting opportunities.

Marks and Taleb are both classic "I Don't Know" types and have achieved great investment success.

This is why Buffett said his famous words: "The most important thing in investing is to not lose your principal, and the second most important thing is to remember the first rule." That's right, Buffett is also an "I Don't Know" type.

An excellent investor cannot guarantee that a single bet will be successful, but they can always seize a local advantage. Only by ensuring they stay in the game can they guarantee enough betting opportunities. After all, if the principal is gone, what do you have to bet with?

Therefore, the key is to adopt an "I Don't Know" attitude to eliminate the mistake of "profiting in the wrong way."

After every profitable trade, review every step of the transaction: the entry, the initial stop-loss, the wait, the money management, the exit, etc., and find the mistakes and violations of your rules.
Be aware of two evil habits: **hope** and **holding**. They are the two culprits that lead to profiting in the wrong way.
How do you handle a "wrong trade"?

I don't think I need to say this, but since you know it's a "wrong trade," of course you should exit immediately to cut ties with the mistake\!

I use the word "exit" because, as you said, a profitable trade can be a wrong trade, and a losing trade can also be a right trade. Therefore, a wrong trade isn't necessarily a losing one; it can also be profitable.

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For this, many people may find it confusing and hard to understand. In fact, I think the confusion comes from the fact that a large number of traders are always looking for certainty, because people feel insecure about things that are uncertain.

But the truth is, nothing is certain in the speculative market. Trading itself is a **game of probabilities**\! Since it's about probability, for a single trade, winning or losing is possible. There's no such thing as a 100% certainty. Therefore, a trade made under the right trading rules isn't guaranteed to be profitable. Even a random trade can lead to a profit. This is the uncertainty brought by probability, and it's also the charm of investing.

At this point, you should understand that what the trading gurus often say—"Following your trading system, even a losing trade is correct. Trading randomly, not following your system, even a profitable trade is wrong\!"—is completely reasonable. The market isn't about how good you feel; it's about how long you can survive. A 51% win rate with a 2:1 risk-reward ratio, repeated 100,000 times, will make your probability of making money infinitely close to 100%.

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Take a rectangle breakout, one of the most reliable chart patterns. If you buy when the price breaks the top of the box, and the price later falls below the bottom and stops you out, were you wrong? No\! You made a **right trade**.

Therefore, a "right trade" is a trade that **executes your trading plan**, while a "wrong trade" is a trade that **doesn't execute your plan** (this aligns with my own understanding). Within a system, profit and loss are not the criteria for judging right and wrong.

I've been in the financial market for over a decade. I've made many mistakes in my trading, and some of them have been fatal. With today's question, I'll summarize them, both for my own warning and for others.

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**1. Frequent Trading**

In the book *The Futures Game*, it says: "The best way for a trader to self-destruct is to put in excessive capital (or trade frequently and without restraint), to the point where they cannot recover from the predicament caused by a single or a series of bad trades."

In a choppy market, chasing rallies and dips, especially in the late stages of a trend, traders become uncertain whether the trend will continue. They often believe that every brief rally or dip is the start of a new trend, leading them to trade frequently, out of sync with the market's rhythm.

Frequent trading is a common mistake for beginners, and its danger is that it slowly drains your principal. To fix this, you must **build your own trading system** and then follow it. **Wait more, and trade less.**

**2. Holding onto a losing trade**

Most traders have held onto a losing position, but few have had it turn back into a winner. Most end up paying a heavy price. The reason for holding onto a loser is the inability to accept a loss, a sense of luck, and finally, a "what the hell" attitude. The ultimate result is a margin call or a huge loss. To avoid this, you must **strictly use stop-losses** and completely get rid of this habit. So many people have paid the price for holding a losing trade; some have even lost their lives. This is a mistake that, once you fix it, you can never make again. Sometimes, it only takes one time to end your trading career.

**3. Adding to a losing position**

Many traders add to their position after they've chosen the wrong direction. Most of the time, this ends in a margin call. In the stock market, there's a saying that you can add to a position to lower your cost basis when the stock price falls. Many people apply this to futures or forex, but they don't realize the danger of adding to a leveraged position against the trend. The fact that you're losing money already shows that your initial judgment was wrong or has not been proven right. Adding to a position in this situation only speeds up the margin call.

**4. Going "all-in" immediately**

Going all-in with a heavy position isn't necessarily a mistake, but it's a huge potential threat. I am a strong believer in taking heavy positions, but the prerequisite is that you have a very strong understanding of the market or a specific market move. Simply put, if you are a beginner or your skill level is average, don't go all-in. Going all-in is for experts, but even experts make mistakes, and when they do, the loss is huge. So, no matter who you are, take it easy with going all-in. The market doesn't care if you're a beginner or an expert. Every trader should have a sense of reverence for the market.

**5. Repeatedly trying to call the top or bottom**

There's nothing wrong with testing a market, but what I mean by repeatedly trying to call the top or bottom is the stubborn kind of trading in one direction. It's okay to fail once or twice, but if you keep doing it, there's a problem. Even if you're right and it eventually works, the profit you make might not even cover the losses from your failed attempts to call the top or bottom.

I've listed five fatal trading mistakes that I made early in my career and paid the price for. These mistakes are not like others where you can fix them and they're gone forever. It's very difficult to completely get rid of these mistakes and never make them again. First, you have to identify where your mistakes are, list them out, and then fix them one by one. The hardest thing to do is to **strictly stop-loss**. If you can do this on every trade, a margin call will be very far away.

Trading is a path where you have to fix your own mistakes; no one else can do it for you.

Trading is a path where you have to constantly improve and break through to succeed.

How do we understand "wrong"? Most of the time, we can distinguish between right and wrong. But often, "wrong" can be a subjective judgment.

As traders, we only need to be sure about a few things: what asset to trade, when to enter, is the entry point and price reasonable, and what is the potential upside? That's all.

Most of the time, we really can't accurately predict the market's direction. But we must proactively **validate our judgments**. A correct judgment is very valuable to us; it will guide us to make more correct moves.

![14.jpg](https://moer.si/usr/uploads/2025/09/2975930312.jpg)

In actual trading, there are not many standards for judgment. For example, if you're buying or selling stocks, you'll mainly look at the stock price, changes in trading volume, and the stock's unique characteristics. For certain technical indicators that work well with the stock, I will use them repeatedly.

Many trading assets are very unique, and institutional funds like to use counter-trend operations. Even when the K-line, moving averages, or MACD all indicate a good buying opportunity, the price still falls, sometimes with a huge intraday drop.

Individual stocks, futures, and even forex pairs all have their own temperament. This isn't formed in a day or two; it's the result of the combined forces of retail investors, institutions, and the most powerful institutional investors over a long period.

Every trader has their own reason for trading, but no one can accurately know everyone else's thoughts. I only need to judge the price and the future trend.

If I'm right, I continue to predict and validate. If I'm wrong, I stop and exit. I don't need to give my unbeatable opponent more opportunities to humiliate me. I'll go find an opponent I can beat; I need to win their money.

**Trend investing** and the **resonance theory** work in the same way. When the conditions for an uptrend are met, rising becomes the path of least resistance, and the price will naturally rise. But if the conditions for a downtrend are met, falling will naturally become the path of least resistance, and the price will fall.

When you're analyzing conditions, observing the market, and digesting news events, and the outcome is the opposite of your judgment, you really have no choice but to exit.

You must understand that mistakes will happen again and again in trading.

For trading individual stocks, since we are not the actual business operators, we cannot accurately predict the company's future direction, current changes, internal management problems, or the myriad of market changes. Of course, even the operators themselves may not be able to make accurate predictions. So, the only way is to let the right trades make a little more money and the wrong trades lose a little less.

If you're participating in more speculative assets like international futures, forex, or gold, the uncertainty is even more elusive. We have no way of knowing the attitude of every market participant, let alone the factors behind every fund flow.

Of course, these are all objective difficulties, and they apply to all participants. But the reality is that behind every failed investment, if we reflect on the reasons, we will find that most of the time, the mistake was not caused by others but by ourselves.

![15.jpg](https://moer.si/usr/uploads/2025/09/4085552389.jpg)

Many times, the root of a mistake is actually a right thing, because if you're always right, you'll start to become blindly overconfident, forgetting that one single failure can swallow all your profits. Forgetting about failure and becoming numb to mistakes is the fundamental reason for your expanded losses.

Fear and anxiety cannot help us make real profits. **Summarizing** and **reflecting**, and continuously **recording the reasons for your mistakes**, are what will give you a chance to achieve stable returns. With every win and every correct trade, make sure you don't let victory go to your head. Only then will you be calm when you're wrong. And when a loss really comes, you'll have the resolve to exit decisively.

In our daily lives, we know that 1 + 1 = 2, and we know that the sky is blue and the clouds are white. But the market is non-deterministic. This is how the phenomenon of "a right trade that loses money and a wrong trade that makes money" appears. The emergence of this phenomenon often makes people feel lucky, which can lead to big mistakes or even a margin call. My most memorable experience of this was with silver recently.

Under the stimulation of the "gold-silver ratio," silver's long positions broke out of consolidation in July this year, and the price followed the 5-day and 10-day moving averages, starting a very beautiful uptrend.

I am a trend follower, so I wanted to participate in this uptrend. On August 11, I entered a long position near the 10-day moving average, around 2620, on a big bearish candle.

Afterward, the price of silver didn't stabilize at the 10-day moving average as I had expected. It continued to fall sharply. At that time, I should have exited immediately with a stop-loss, and I did place a stop-loss order. But for some reason, the stop-loss order didn't get filled, and I was on a business trip and couldn't continue trading.

![16.png](https://moer.si/usr/uploads/2025/09/3299667768.png)

When I came back from my business trip on August 13, I found that silver had started to rebound sharply. This position, which should have been stopped out, was now up over 100 points because the stop-loss failed. This windfall made me incredibly happy, and I felt so lucky that I should press my advantage\!

So on August 14, even though the 5-day and 10-day moving averages formed a death cross, a clear signal to exit, I started to add to my position, dreaming that luck would continue to be on my side.

After a few days of consolidation, silver did continue to rally and even broke above the 2900 mark. Even though the MACD, RSI, and even KDJ all showed signs of divergence, and my trading system showed a clear signal to go short, I was still so caught up in my luck that I thought silver would break out like it did in June and July after a month of consolidation. After all, isn't there a saying, "A long consolidation will inevitably lead to a rally"? So I didn't take any of those risk warnings seriously.

The result is what everyone knows. On September 21, a huge bearish candle announced the arrival of a downtrend, and on September 24, the price even fell below the 2200 mark, leading to a margin call on my account.

This is the most memorable wrong trade I've made recently. What it taught me is: **I would rather lose money on a right trade than profit on a wrong one.** Otherwise, it will make you addicted to relying on "luck," and you'll eventually walk down the road to a margin call.

![17.png](https://moer.si/usr/uploads/2025/09/1665246699.png)

For traders, the journey to maturity is a process of constantly correcting yourself and your understanding of the market through failure.

In this process, mistakes are inevitable. I think the most common mistake we make is watching our trades for too long.

Constantly monitoring a single trade as it rises and falls is a destructive activity that can take away years of a trader's profit. This process, often called "counting money," not only deepens fear but also increases uncertainty, making it impossible to focus on the correct techniques that ultimately determine how much we can profit.

![18.jpg](https://moer.si/usr/uploads/2025/09/1526806505.jpg)

Focusing too much on "where you are" instead of doing what you should be doing leads to unwise, baseless, knee-jerk, and overly quick reactions. On the contrary, traders must be sure that their every technical step is correct and that if they follow the correct techniques, profit will naturally follow.

"Counting money" is usually a problem for traders who are not used to consistent profitability. It not only robs traders of significant gains but also fosters a long-term sense of uncertainty, a fear of loss, and an emotional imbalance that can lead to destructive behavior.

I used the following three methods to overcome my habit of over-monitoring trades:

For every trade, set two protective exit prices to sell your entire position. Every trade you make should have an entry point and two exit points: a stop-loss and a target. The stop-loss is for protection, and the target is for profit.
Only exit when your position reaches the stop-loss or the target, whichever comes first. By sticking to this principle, traders put the fate of each trade on their trading strategy, not on their own greed or fear.
If the desire to exit before either of the two exit points becomes uncontrollable, only sell half, and keep the other half until your strategy allows for an exit. In this way, you satisfy your urge to sell while keeping your trading strategy intact.
Making money in the wrong way reinforces bad habits and irresponsible behavior. Once a trader tastes the success that comes from a wrong approach, they will almost always repeat that mistake until that wrong approach smacks them down and takes back the money earned in the wrong way, and even more.

Right actions and right methods won't always generate profits for an honest trader, but one thing is for sure: repeated wrong actions will eventually lead to the demise of a lazy trader.

Trading is a lonely game.

When creating and implementing your own trading plan, you must keep a distance from the outside world. While a trade is in progress, you can't tell others about your trading plan. You need to be alone with your trade, learn what you can, make decisions, document your plan, and silently implement it. After a trade is over, you can discuss it with people you trust, but you must remain silent about trades that are currently in progress.

Almost everyone has a profitable record, but no matter how well that profit turned out, it won't make you a winner in the market. After all, no matter how big a profit, it can become meaningless with just one loss. Therefore, you need to build a model that is profitable in the long run.

Only a continuously growing asset can prove a person's trading ability. People tend to become arrogant and careless after a big profit or a string of profits. In reality, trading is like walking on thin ice, and arrogance will sooner or later bring back your profits.

Everyone has their moments of being right. Even if you have a monkey throw darts at a blackboard full of stocks, the stocks it picks might turn out to be quite profitable. A single profit doesn't prove anything. The real difficulty is **consistent profitability**.

As Oscar Wilde said over 100 years ago: "Every true ideal is ultimately backed by money, because money means more freedom, and ultimately, a way of life." I want to spend more time with my kids, I want to live in a big house, I want to vacation in the Caribbean during the northern winter. I don't want to be in a hospital on call 24/7. These desires drive me to make money.

When you start making money, it's important to know how to be satisfied and when to get off the merry-go-round. Human desires are endless—a beautiful horse, a villa, an interesting toy, etc. If you don't exit during good times, you're chasing endless money, and your life will only get worse. Remember, the goal is **freedom**, not endless money.

Possible independence is a good way to solve the problem of greed.

Greed and fear are two sides of the same coin. If you trade smaller positions, you control greed, and fear is less likely to invade you. Your mind will become clearer. Conversely, if you greedily increase your position, fear will be your constant companion. Low fear leads to good decisions and big profits, while high fear leads to bad decisions and big losses.

One of the biggest appeals of trading is the freedom it brings. Another huge appeal is that it can be a lifelong pursuit. The longer you trade, the more experienced you become. **Memory, patience, and experience** (the advantages of age) are the most fundamental and useful things in trading. But first, to make money from experience, you need to **survive** and stay in the game long enough. You need to set **money management rules** so that a major loss or a string of losses doesn't take you down.

When you're not afraid to lose, you won't lose. When you only want to win, you won't win\!

In the stock market, there are two treasures: a good horse and a fast knife. A good horse for quick profits, and a fast knife for cutting losses. This way, you won't get stuck easily\!

When analyzing the market, trading volume is the most important, price is the second, shareholder style is the third, risk baseline is the fourth, and the theme's excitement is the fifth.

**Follow the trend**—"The stock sea is full of high winds and waves. Steer your boat steadily to avoid the abyss. When the tide rises, follow it, and sing loudly to the North Star."

Technical indicators are not about the indicators themselves, but about **how the market reacts to and diverges from them**.

Never easily go all-in. Doing so helps you maintain a calm mindset and gives you the flexibility to attack or retreat.

Continuously absorb the stock's nature and continuously forget human nature. Only then can you truly merge with the market.

**Small volume** and **no volume** have a fundamental difference. The former is a normal requirement for healthy stock price development, while the latter is a sign of a weak stock price.

The five rules of the stock market: 1. Be steady. 2. Be accurate. 3. Wait. 4. Be ruthless. 5. Be patient.

Five conditions for investing in the stock market: knowledge, patience, courage, health, and capital.

Don't waste your time trying to call tops and bottoms. Tops and bottoms are formed naturally, not set by people. Being able to eat the middle part is already a success.

Greed, fear, hesitation, luck-seeking, and overconfidence are all common human weaknesses. Never underestimate your own weaknesses, and never overestimate your own abilities. Almost every mistake is caused by your own weaknesses. In a sense, the number of your human weaknesses determines the amount of your profit or loss.

Safe stocks during a market pullback: they didn't rise much in the previous rally, they're trading sideways to "liberate" all the trapped investors, and their center of gravity is slowly rising.

No matter what method you use, mastering just one is enough. Overlaying the K-line chart of a stock with the market index's K-line chart can help you judge if a stock has institutional support and how strong it is.

When institutional investors are truly accumulating shares, it's silent. If there's a huge volume, they're trying to attract your attention.

You must figure out the reason for a huge volume to make the safest judgment. It's better to buy high and understand why than to buy low and be confused.

When you're trading smoothly, don't get carried away. Experts often wait, while beginners are often helpless.

The overall market is a product of the resonance between government policy and institutional investors, while an individual stock's move is a solo performance by the institutional investor.

When both buying and selling feel awkward, you should immediately exit and wait for the right moment to re-enter after adjusting your state of mind.

Learning to be a "traitor" to retail investors is to be in league with the institutional investors.

Be flexible with your buys and sells; don't be a penny pincher.

**Market action digests and includes everything\!** The best way to judge if news is true is to look at the market. "Ducks are the first to know when the river turns warm in spring." Whether news is true or false, you'll know by looking at how the institutional investors react.

In the securities market, "Those who speak don't know, and those who know don't speak."

A true investor must be like a roly-poly toy, able to quickly get up after any setback.

If you only focus on the "numbers" of buying and selling stocks, you're a standard speculator, not an investor.

The deceptive nature of stocks is not in their underlying value but in the illusions they offer traders.

Look backward, but more importantly, look forward. Look up, but more importantly, look down.

For most investors, the important thing is not what they know, but being soberly aware of what they don't know.

Don't fight the market. Don't speculate to satisfy a specific need.

Investors make money from others' mistakes and lose money from their own.

Those who find excuses for their failures in the investment process will ultimately pay the price for their excuses themselves.

The market is sometimes like a drunkard—it cries at good news and laughs at bad news.

Don't complain about missing out. The stock market always has opportunities.

The market didn't beat you; you beat yourself.

There is nothing new in the market; it's just a constant repetition.

**Luck and hesitation:** Luck is the main culprit for increasing risk, and hesitation is the chief culprit for missing opportunities.

"When you hit outside, your arm bends inward." Only when your arm bends inward can you have the space and momentum to hit outside. A stock price drop is actually just creating space and accumulating energy for a future rise.

Treat the market as your teacher, practice without regret, be quick to learn without tiring, and be humble in learning without slackening.

One characteristic of a mature trader is that they don't fight when it's not a clear-cut win.

The one who laughs last, laughs best. Profit or loss is only known when the final settlement is done.

Feeling sour, disappointed, angry, and crazy, you buy in—and then get stuck.

Volume is the spirit of the stock price, and the stock price is the expression of the volume\!

You can ride a wave when you're laughing, but you can only trade short-term when you're tense.

No plan, no work; no plan, no trade\!

The essence of trading is: **"Using strategy while laughing, which is better than seeking victory in a tense state\!"**

Regardless of a bull or bear market, you'll always lose money by going short because you can only make money by going long. But refusing to go short when you should will cause you to lose a huge amount of money\!

When the market is on an uptrend, you should buy even a "broken car" stock; when the market is on a downtrend, you can sell even a "good car" stock. When the stock market is continuously rising, unpopular stocks will also rise.

Going long with huge volume gets you stuck; going short with small volume gets you squeezed\!

In a price dip, whether the volume is large or small is decided by the bulls. In a price rally, whether the volume is large or small is decided by the bears\!

Don't estimate the market with your own financial strength. Don't let your profit or loss influence your resolve\!

All the wealth in the stock market is hidden in the turning points\!

You need to rest after getting hurt. Don't get back into the market too quickly after suffering a loss. Wait for the next good opportunity\!

When the stock market is falling, volume doesn't have to increase. When it's rising, volume must increase.

A word of advice: When you enter the market, you must think about whether you can find someone dumber than you.

Traders' unchanging weaknesses: 1. Fear. 2. Greed. They hesitate when they should buy and can't let go when they should sell. Prices often rise with hesitation and fall with cheers. When things go to an extreme, they reverse.

Don't ignore the overall market environment, and pay attention to trading volume. Technical analysis and fundamental analysis should complement each other.

If you are decisive, you won't be in chaos. If you are indecisive, you will miss opportunities. When you're sure, you must act decisively.

**Intuition, feeling, and alertness:** Before a market move starts, you should have a keen sense of intuition. During a market move, you should have a good feeling for it. And when the market gives a danger signal, you should maintain a high level of alertness.

Pay attention to momentum during a rally, and don't care about the substance during a dip\!

Volume is the spirit of the stock price, and the stock price is the expression of the volume\!

When you're right, you're never absent. When you're wrong, you rest your mind\!

Don't seek a price that's skyrocketing. Trying to make a huge profit when prices skyrocket is often in vain\!

The way of the stock market is simple, and its skillful application lies in your heart. Treat the market as your teacher, practice without regret, be quick to learn without tiring, and be humble in learning without slackening.

If the current volume is larger than the previous volume, there is hope for the future.

Drawing the K-line charts of your stocks by hand every day will make your thought process align with the institutional investors\!

If you can "go with the wind when it's there, and hide under the sea when there's no wind," you'll find that trading stocks is actually very relaxing\!

Only those who are not greedy can become the final winners in the stock market. Only those with their own opinions can stand firm in the market for a long time\!

Have a trading plan before the market opens; don't listen to others' plans during the market\!

The high-level trader's way of washing out positions: "In the market and out of the market, they flip and roll. They tell lies until you believe them, and the little fish swim into the big fish's mouth. There are daily ups and downs, but you're led by the nose. You're excited when prices rise and heartbroken when they fall—but don't jump off the roof."

Study the stock price's trend to judge the institutional investor's intentions. Study the market's changes to grasp the institutional investor's movements.

**No strategy is the best strategy:** The most important thing in technical analysis is to be flexible. Analysis tools can help you grasp the pulse of price changes, but in the end, you must break free from the constraints of the tools to find a natural and smooth flow. No strategy is not a lack of strategy; it means forgetting fixed strategies and integrating yourself with them. This is the highest level.

Deciding on different strategies based on a stock's unique characteristics is called "prescribing the right medicine." This is the highest level.

Feel it with your heart and comprehend it with your spirit. A chart is just the surface of a price change. The institutional investor's true intentions are hidden behind the chart. Only by truly comprehending the institutional investor's intentions can you dance with them.

If the market always needs good news to stay alive, then you should leave it quickly, because it's terminally ill. Once the oxygen is cut off (no good news), it will be in mortal danger.

There are three types of people in the stock market: **the foreknowledgeable** who eat a lot of meat, **the late-aware** who can still chew on some bones, and **the unaware** who have to pay the bill.

The overall market is a product of the resonance between government policy and institutional investors, while an individual stock's move is a solo performance by the institutional investor.

Trading stocks is like farming: sow in the spring, harvest in the fall, and store in the winter\!

Those who make money are bold; those who lose money are cold\!

A stock often rises during hesitation and falls amidst cheers. When things go to an extreme, they reverse.

If the market is always going to rely on good news for oxygen to stay alive, then please leave this market quickly, because it is already terminally ill. Once it lacks oxygen (no good news), it will be in mortal danger.

There are three types of people in the stock market: those who know ahead of time and eat a lot of meat, those who realize late and can still chew on some bones, and those who are unaware and have to pay for the bill.

The overall market is a product of the resonance between national policies and market institutions, while individual stocks' moves are the institutional investors' solo shows.

Trading stocks is like farming: sow in spring, harvest in autumn, and store in winter\!

People who make money are brave; people who lose money are afraid\!

For me, having a solid investment philosophy and sticking to it is my entire perspective. If you do your homework, stay patient, and isolate yourself from popular opinions, you can do very well. But when you get into trouble, it's usually because you've stepped outside your circle of competence and started to deviate from your investment philosophy. No one can be a universal trader, but many mediocre traders think they can. Every super-trader has their own area of expertise and never ventures into other fields rashly. Buffett has his principles; he won't touch the Nasdaq no matter how much it goes up. Soros has his principles; he seems completely uninterested in holding a stock for the long term. Dennis Krokowski and others only study price patterns and use trend-following systems to capture long-term price trends, seeming to pay little attention to fundamental economics. Williams, on the other hand, focuses entirely on short-term price strength, ignoring the long-term trend, and only operates in the short term, achieving unprecedented returns of over 100x in a single year. O'Neil only cared about growth stocks in the strongest-performing industries of the past two years and made a fortune from them. Every super-player has their own area of expertise and their own set of principles. The fundamental principles are simply to **let profits run, cut losses, and seize low-risk, high-reward opportunities**. If we feel that we can never join the ranks of the winners, we should consider whether we should focus on one or two things and do them to the best of our ability.

**The Irreplaceable Nature of Trading Experience**

Crucial moments in the market are often best handled and solved with experience, not just knowledge\! Trading experience is irreplaceable and cannot be bypassed through learning alone. Trading experience is the crucial link between trading knowledge and actual trading. Most investors in the market have a deep theoretical foundation. They are familiar with various trading theories and technical analysis tools and have trading philosophies and principles memorized. But what they lack is rich trading experience, which is an irreplaceable and fundamental prerequisite for successful trading.

From a knowledge-based perspective, there is only so much knowledge in the market. If you are willing to learn, you can quickly finish all the books on the market and understand them. But you can never accumulate rich trading experience in a short amount of time. This is the most fundamental difference between an average investor and an experienced trader. It's the reason why you can often think about it and see it, but you can't do it.

A person's trading experience will shape their trading style, just as a person's life experience will shape their personality. Personality is difficult to imitate, and so is trading style. You cannot acquire a trading style by reading books.

Successful traders have very distinct personalities. They summarize their own trading to form their own unique trading theories. All the theories of historically successful traders have eventually merged to form the market's trading theories. At this stage, these theories have more in common and their unique characteristics are relatively less clear. But investors learn these common theories. Common theories are easy to learn and understand, but they are not very practical. Practicality can only be supported by trading experience, because trading is a highly personalized activity.

So we can master market knowledge through hard work, but we cannot gain trading experience through hard work, because trading experience needs time to accumulate, and time is something you can never jump over.

This is a relatively mechanical trading system, but its profitability is related to the trader's ability. This is indeed true. Many people try to find a trading system with profitability but often ignore the accumulation of their own trading experience, or they don't even realize its importance. Such a person will never succeed. Without trading experience that matches the trading system, any trading system is worthless.

At a crucial moment, a life-and-death moment, only rich trading experience can help you. Many clients complain that the market moved too fast and they didn't have time to exit. In reality, it's not that the market was too fast to exit, but that the investor's thinking and reaction couldn't keep up with the market's speed. At such a critical moment, you cannot rely on normal thinking to decide whether to exit or stay. You have to rely on your **first reaction**.

And this first reaction comes from rich trading experience. An investor without trading experience won't have this quick, instinctive reaction. You can never learn this kind of reaction from a book\! It's like an athlete's on-the-spot performance or a sudden flash of insight. Such a reaction is often decisive and cannot be imitated or learned. It all requires rich experience to reach this state of selflessness.

Trading experience includes: trading mindset, decisiveness in entering and exiting, attitude towards stop-loss, objectivity towards the market, and whether to make different or similar decisions when faced with the same trading signal. This is especially true for intraday choppiness, which can almost only be handled with experience. Any trading system will frequently give out wrong trading signals, and this is the most important reason why almost no one can stick to a system.

I don't think a system that doesn't give out wrong signals can exist. The system's weaknesses can only be compensated for by the user's rich trading experience, because we really cannot find a strictly human-free trading model from a mathematical perspective. Any system can only adapt to a certain state of the market, not all states. This requires the trader themselves to compensate for the system's weaknesses.

The trading signals given by the system itself need to be evaluated by the trader to see how valuable the signal is and how much capital is worth putting into the trade. In a trend, the system will naturally tell you how to handle it. In this situation, the trader's own experience can sometimes even be a factor that affects the trading outcome. But in a choppy market, how to protect yourself requires very rich experience, because the judgment of a choppy state itself needs to be made by the trader. Making money in a trending market is not too difficult, but reducing losses in a choppy market is very, very difficult.

The difficulty in trading is not how to make money, but **how to protect your profits**\! It is possible to profit by following a trading system, but how to protect your profits is closely related to trading experience. Similar trading signals appear in different assets. Do you execute it or not? To what extent do you execute it? On which asset do you execute it? How do you allocate your funds? Sometimes, because you chose a different contract for the same asset or abandoned one asset for another, even though you followed the trading system, the final outcome can be very different. This is why the same system can produce completely different results. A person with rich trading experience is like a well-trained hunting dog. They have a keen sense for the most valuable assets or contracts and can capture the most valuable targets with an almost instinctive reaction, while abandoning relatively less important contracts. This ability cannot be acquired through learning. Another situation is when a new trading opportunity appears, but your original position is still within the trading system's parameters. Do you close the original trade and start a new one, or do you abandon the new opportunity and continue holding the original position? It's a difficult choice\! In this situation, you need your experience to help you make the decision.

In short, first, we must understand the importance of trading experience. Second, we must be especially clear that trading experience is irreplaceable and cannot be skipped. It can only be accumulated over a long time, so you must not blindly use others' methods to trade. The importance of trading experience runs through every part of trading, but since everyone's trading experience is different, trading creates thousands of different combinations. In these thousands of combinations, you should find your own and form your own style with your own experience. Every person is irreplaceable, and so is trading experience.

If you must win and be right, if you cannot lose or be wrong, you will find that defining and interpreting market information is painful. In other words, you will see the information the market generates as a hindrance to your happiness.

If you focus on trying not to make mistakes, the more you try, the more mistakes you make. Learning more and more about the market to avoid pain creates a complex problem, because the more you learn, the more you expect from the market. If the market doesn't do what you expect, you will be in pain. You unconsciously create a dangerous cycle: the more you learn, the more exhausted you become; the more exhausted you are, the more you feel you need to learn. This cycle will only stop when you exit trading out of disgust or when you realize that the root of your trading problems is your perspective, not a lack of market knowledge.

When you finally break free, you will be bewildered, awakened, and feel betrayed. You will wonder how such a thing could happen. In reality, you were betrayed by your own emotions.

Your attitude and thoughts are not created by the market; the market just reflects your inner self. If you are confident, it's not the market that made you confident. It's because you align with your beliefs and attitudes, allowing you to experience, take responsibility for the results, and understand deeply. You can maintain a state of confidence because you are always learning.

On the contrary, if you are angry and afraid, it's because you believe the market creates your results, not other reasons. If you don't take responsibility for your results, then you can also believe there's nothing to learn, and you can stay the same. You won't grow or change. The result is that your perspective on things doesn't change, so your reaction doesn't change, and your unsatisfactory results don't change.

While learning is always a good thing, if you don't take responsibility for your attitudes and perspectives, you are learning for the wrong reasons, which will make you use what you've learned improperly. If you don't realize this, you will use knowledge to avoid the responsibility of taking risks. In this process, you will create the very thing you've been avoiding, causing you to cycle through pain and dissatisfaction.

If you try to avoid the pain of punishing yourself, you will blame other things. This is like putting an infected Band-Aid on a wound. You may think you've solved the problem, but the problem is only delayed and will get worse. The result has to be this way, because you haven't learned enough, and you don't know how to interpret things to get a more satisfactory result.

If you don't have a winner's attitude, no amount of market analysis will compensate for it. The market can give you some profitable trading advantages, but if you don't have a winner's attitude, these advantages won't make you a consistent winner.

If you take responsibility and don't expect the market to give you or do anything, the market will no longer be your enemy. If you stop fighting the market, you will be surprised to find that you quickly know what to learn and how quickly you can learn it. **Taking responsibility is the cornerstone of a winner's attitude.**

Very few people start trading with the right beliefs and attitudes about responsibility and risk. Many of us have irrational fears. Because we don't want to work hard to overcome them, we simply live in contradiction.

You must look at the market objectively and not misinterpret it. You must not feel pressure or hesitate when you trade. You must also use a positive attitude to overcome the negative results of overconfidence or over-excitement. Your goal is to **develop a trader's mindset**. When you achieve this, every aspect of trading will fall into place.

Trading begins with seeing an opportunity. If we don't see an opportunity, there's no reason to trade. Every feature of market behavior reflects an opportunity that will satisfy someone's needs, goals, or desires. Every feature has a certain meaning and a certain level of significance or importance.

I think trading shouldn't be made so complicated. The idea that a profitable trade can be wrong and a losing one can be right is just a matter of considering future factors or trading habits. But a trade is just a trade.

As for my own wrong trade… my most memorable one was when I first entered the market.

Actually, I was tricked into forex. When I was looking for a job, I somehow ended up with a forex job. I was new to society and inexperienced. The job ad said "sales," and I thought it would be similar to selling stocks, so I happily went.

After being successfully hired, I found that their sales job requirements were not strict. They didn't require us to hand out flyers or make calls. Instead, they introduced us to the product under the guise of "getting familiar with it." Hmm, if you've had a similar experience, you'll know that we applicants were their potential targets. But I was so young back then, I didn't get it.

First, they gave us a demo account to get familiar with. After some fierce-looking operations, hey\! Even my random trades were profitable. The returns were so exaggerated, much higher than stocks. Hmm, I took the bait.

They didn't push too hard, training us on related topics while enticing us. They even told us that if we brought in a client, we could get a commission of about $7 per lot they traded, and then they kept hinting. As a young person new to society, who could resist that? My mind started racing. If I opened an account myself, I could make money and get a commission. That's about $40 per lot. If I made a few trades, my life would be great. I was so smart.

Yes, thinking I was so clever, I happily opened an account with $5,000. I thought that even if I lost the money right away, the loss wouldn't be much, and I could still make a commission. A beautiful life was about to begin; I felt I was about to get rich.

Then came all the trading. The fact proved that I was overthinking and overestimating myself. My account was wiped out in less than a month. And I was shaking with the $5,000 I got in commission. I spent $30,000 and got back $5,000 in less than a month. I was so smart.

As for how I handled it, as you can see, I had no chance to handle it. The account was wiped out immediately. But it was because of this experience that I deeply realized the danger of **frequent trading**. Of course, frequent trading is just a method, with no good or bad. The fact that I lost money doesn't mean other experts can't make money by trading frequently. I don't doubt that at all. It just means it's not for me. So, now I'm a low-frequency trader. I don't place more than two orders a day and set profit and loss targets. When I reach them, I stop trading. I feel pretty good about this now. I don't have to spend too much energy on trading; after all, trading isn't my whole life.

This is indeed a problem, because every trader thinks they are right on every trade and want to make money. But unfortunately, a profitable trade isn't necessarily right, and a losing one isn't necessarily wrong.

Of course, if a mistake is piled on top of another mistake, it will definitely be a huge loss. Right and wrong need to have clear definitions. But the market cannot be defined by you, so we can only define ourselves.

I just made a big mistake in the last two days, and my account looks very bad now. This was a very wrong trade. I'll recreate the situation and hope it can serve as a warning for everyone.

![19.png](https://moer.si/usr/uploads/2025/09/3930224785.png)

This is the GBP/USD chart from a few days ago. Due to renewed deadlock in negotiations, GBP/USD ended its previous uptrend and fell below the 1.30 level. After my trading system gave a short signal, I had a moment of irrationality and thought that the previous low area, around the 1.30 whole number, would have strong support. So I went against the trend and entered a long position there with a relatively large size. The trade was initially losing but then bounced back above 1.30. But I didn't realize this was my chance to escape. I still thought the pair would rally against the short signal. It then fell another 200+ points, and I was forced to take a stop-loss. But then the price rebounded to 1.30 again. At this point, I was so remorseful about my previous operation that I didn't seize the opportunity to short and make up for my loss.

This wrong trade is very clear. First, I didn't follow my system's signal and instead traded blindly based on my subjective opinion that there was support at certain levels. Second, after the stop-loss, I didn't calm down and missed the opportunity to follow the signal and go short to recover my losses.

It's fair to say that many times, when you're in a wrong trade, you don't know it, or you are unwilling to admit it. This is the biggest problem—a subjective mistake caused by human nature. Therefore, I still suggest that when you trade, although you should have your own subjective analysis, it's best to analyze based on the signals from your system. If you agree with the signal, trade. If you don't, wait. But never trade randomly based on your own subjective opinion.

There are two types of wrong trades. One is when your analysis is wrong before you even place the order, so you place the wrong order. The other is when the market changes later, and the original reason for your entry is no longer valid.

In either case, once you find that the "foundation" of your trade is wrong, you should exit in time, regardless of whether you have a floating profit or loss.

The most memorable one for me was trading EUR/USD in 2018. Based on the statements of European Central Bank officials, there was a consensus that Europe's future economy was looking good, and the euro was rising. But ECB President Mario Draghi unexpectedly gave a dovish statement, causing EUR/USD to fall about 300 points in a single day. This led to my previously profitable trade ending in a loss.

When you trade, you shouldn't think like a trader. This will always make you get led by the market and unable to cope. At that time, I should have thought like the ECB president. The outcome, while unexpected, was also reasonable—a central bank head cares more about stability. Therefore, Draghi's statement was very cautious and was actually more beneficial to Europe's budding economic recovery.

The same logic applies to all central banks.

Let me share my thoughts. This question is very crucial, and it's something many people have not figured out. When you have a high-probability profitable strategy, you usually think that you should let your profits run and stop-loss at a manageable level for your losses. I want to say that this is probably what many people think, and it's also the hardest thing to master. But no one has ever thought that this logic itself is flawed. It's probably a stereotype we have from reading too many books. It sounds right, but it's not that easy to execute. And if you're trading nervously, hoping to watch the market's every move, then congratulations, you've been trapped. If you don't wake up in time, you won't get out. No strategy can guarantee a winning trade every time. Those classics in the books are not for you, especially not for someone new to trading. Their theories focus on major events and the coordination of technical signals. Their capital, their way of adding to positions, and their confirmation methods are all different. Once they confirm and seize an opportunity, they hold the position for six months, a year, or even longer. But average traders use limited capital and time to fight a market that has almost unlimited capital and time. So, generally speaking, they are short-term traders, doing intraday or short-cycle trades. Only when you can hold a trade and be profitable for over three months, like a master, will you be close to those professional institutional investors. Also, have you ever thought that since there is no 100% winning strategy, you can find a way to handle a failed entry and exit the trade with no or very little loss. The rest is profit. If you can figure this out and apply it, you can handle most market conditions like a fish in water. And you won't have to stay up all night, constantly wondering what's happening or what will happen to the market. This is my advice to everyone. Sometimes, thinking for yourself can bring clarity to many of the problems that confuse you.

A "wrong trade" is a very broad statement.

The causes of a "wrong trade" can be many, including:

- Trading in the wrong direction
  - Trading the wrong asset
  - Choosing the wrong trading system
  - Using too much leverage
  - Missing the best exit opportunity
  - Having an ideal entry point that turns out to be wrong
  - ... and so on

All of the above are wrong trades.

Therefore, if a wrong trade occurs, you have to analyze the specific situation\!

![20.jpg](https://moer.si/usr/uploads/2025/09/2538951861.jpg)

To summarize the six types of wrong trades above, they can be categorized into three groups:

1.  **Trading operational mistakes**
2.  **Trading strategy mistakes**
3.  **Money management mistakes**

Next, I'll go over how to handle each of these three situations.

**1. Trading Operational Mistakes**

1.1 **Trading in the wrong direction**

Trading in the wrong direction is common and no reason to panic.

- If the loss is within 10 points, take the stop-loss and exit.
  - If the market is moving very fast, exit immediately with a stop-loss.
  - If the market is choppy, check the 5-minute and 15-minute chart patterns and set a break-even stop-loss.

1.2 **Trading the wrong asset**

Assets are often correlated. If you trade the wrong asset, there's a good chance you can exit at a break-even or even with a small profit.

- First, place an order on the correct asset.
  - Then, analyze the market for the wrong asset. Determine if it has a correlation. If it does, you can likely exit at a break-even or with a floating profit. If it doesn't, manually close the position within your acceptable loss range.

**2. Trading Strategy Mistakes**

Generally, a trading strategy mistake is either "trading a trend in a choppy market or trading a choppy market in a trend." The way to handle this is easier. Regardless of whether it's a trend or a choppy market, the direction is the same in the short term, so you can often get a small profit.

2.1 **Trading a trend in a choppy market**

In a choppy market, you often take profits by "selling high and buying low." Therefore, when your account shows a floating profit, first reduce your position to the size dictated by your choppy market strategy. Then, change your take-profit to the previous high or low.

2.2 **Trading a choppy market in a trend**

This is the easiest of all wrong trades to handle. When the price approaches your entry point, you can add to your position. If it's far away, I recommend not adding to it and instead widening your take-profit range.

**3. Money Management Mistakes**

This is usually caused by entering with the wrong lot size, leading to an oversized position.

I will first calculate the success rate of this trade. If it's very high, I will choose to add more capital to reduce the risk of my position. If I estimate the success rate is not high, I will close the position to protect my principal for a future profitable opportunity.

These are my methods for handling wrong trades over the years. I hope they help you.

Most traders in the market are struggling. Very few can achieve consistent profitability. They keep making mistakes without summarizing them, and eventually, they start to doubt if they can even make money. They may think their method is wrong and keep making wrong trades. In reality, a wrong trade is simply a wrong judgment at the right time or entering rashly at the wrong time. In summary, it's due to the following reasons:

**Lack of direction**: Lacking the ability to judge the macro trend of a specific asset. Not knowing how to read monthly, weekly, and daily charts. Trading against the trend, i.e., going long in a downtrend or short in an uptrend. The correct approach should be: go long in an uptrend, go short in a downtrend, and stay out of a non-trending market. Note that the trend here should at least be indicated by the daily chart and be in the same direction as the medium-term trend from the weekly chart and the long-term trend from the monthly chart.

**Lack of patience**: Violating the "hold winners" rule, i.e., "Do not close a medium- to long-term position unless the large-cycle trading system issues a closing signal, and do not close a short-term position unless the small-cycle trading system issues a closing signal." Although you can identify a major trend, you lack the ability to stay calm and hold the position. You lack enough patience and confidence and always close profitable positions too early, robbing them of their opportunity to fully develop. A trader must build a large-cycle trading system based on large-cycle K-line charts (such as daily charts) as a basis for medium- to long-term entry and exit.

**Not refined enough**: Lacking the ability to judge the micro-trend of a specific asset. Not knowing how to read 1/15/30/60-minute K-line charts. Lacking the ability to correctly grasp buying and selling opportunities, always chasing rallies and dips and making countless mistakes. This doesn't affect correct medium- to long-term positions much, but it can lead to big losses in margin trading. A trader must build a small-cycle trading system based on small-cycle K-line charts as a basis for short-term entry and exit.

**Forced trading**: Lacking the wisdom to distinguish between "where profit comes from" and not understanding that all profit is a gift from the market. You can know you'll win, but you can't force it. No one can ignore the market and try to force a profit. A trader can only follow the trend. You should patiently wait for all conditions to be in your favor and find the turning point with the highest probability of success, i.e., **follow the "certainty principle."**

**Frequent trading**: Lacking the ability to distinguish between temptation and opportunity. Fearing you'll miss out on an opportunity, or even thinking there are opportunities everywhere. Lacking the ability to break free from the evil temptation of "intraday noise," which leads to "frequent trading" without a grand direction. The result of frequent trading and forced trading is the same: many small losses add up to a big loss.

**Overtrading**: Because of greed or the desire to get rich quick, you violate the law of "more haste, less speed" and try to get rich overnight by going all-in. You don't understand the trading rule that position size is proportional to the probability of success. You lack a correct money management system and always "overtrade" by using heavy positions or high leverage, which ultimately leads to either a huge mental pressure and messed-up operations with no results or a complete loss due to a single mistake or unexpected event.

Of course, once you know your mistake, the most important thing is to correct it in time. The trading plan and execution are both very critical.

Authored by moersi. Please keep the original link when sharing: How Do You Handle a "Wrong Trade"?
This is not investment advice, and we are not liable for any losses.