Trading Iron Rule: Stop Loss is Survival, Holding Positions is Destruction

I. The Core Logic of Stop Loss: The Market is Wrong, Discipline is Right

1. The Survival Bottom Line of Risk Control
   A 30% drop in the cryptocurrency market in a single day is not uncommon (e.g., the LUNA crash in 2022). With 10x leverage, a 10% reverse fluctuation can lead to liquidation. Stop loss is not about predicting the market but exchanging small losses for the "qualification to stay in the market." For example, if BTC drops from 100,000 to 90,000, a 5% stop loss means a loss of 5,000 USD. If one holds the position until it reaches 80,000, a 10x leverage will lead to liquidation and a total loss.

2. The Firewall of Emotion Management
   Holding positions essentially fights against market rules with a sense of luck. When the loss on a position exceeds 20%, traders are prone to fall into the "sunk cost trap," even adding margin, ultimately leading to liquidation during a market crash. Data shows that users who hold positions have an average loss 4.7 times greater than those who use stop loss, with 90% of liquidations stemming from holding positions.

3. The Optimal Solution to Probability Games
   Even if the price rebounds after a stop loss (e.g., BTC rebounds to 105,000 after a stop loss at 103,000), it is still a correct decision from a probability perspective. Assuming 10 trades, with 6 stop losses leading to declines and 4 rebounds, strict stop-loss traders can profit through "6 small losses + 4 large gains," while those who hold positions will be eliminated during a crash.

   

II. The Fatal Trap of Holding Positions: Luck is Right, Logic is Wrong

1. The Death Spiral of Leverage Markets
   Holding positions in contracts can lead to a decrease in margin rates, triggering forced liquidation when the system hits the liquidation line. In June 2025, during the conflict in Iraq, ETH dropped from 2,800 to 2,450 USD while holding positions. Those with 10x leverage not only lost their principal but also incurred an additional 15% loss due to forced liquidation.

2. The Hidden Cost of Opportunity Loss
   Holding positions ties up capital and causes missed new opportunities. For example, while holding BTC at 100,000, the L2 sector ARB might surge by 50%, but being tied up in positions leads to missed opportunities. Data shows that users who hold positions have an annualized return rate 63% lower than those who use stop loss.

3. The Collapse of Trust in the Trading System
   A single profitable position (e.g., BTC rebounding from 90,000 to 100,000) can reinforce incorrect perceptions, leading to frequent holding of positions. This "survivorship bias" is the beginning of system collapse, ultimately resulting in devastating blows during black swan events (e.g., the FTX crash).

   

III. Iron Rule Execution Guide: Establish Anti-Human Discipline

1. Mechanical Stop Loss Method: Exit immediately if a single loss exceeds 5% of the account, without looking at the market or hesitating;

2. Technical Stop Loss Method: Automatically trigger stop loss if it falls below key support levels (e.g., BTC 103,000, ETH 2,480), using conditional orders instead of manual judgment;

3. Emotional Stop Loss Method: If holding a position leads to anxiety, close the position immediately regardless of profit or loss; decision-making accuracy drops below 20% when emotions are out of control.

The essence of trading is a probability game; stop loss is a way to avoid uncertain risks by accepting certain small losses. Remember: surviving in the cryptocurrency market is more important than making quick money. Strict stop-loss traders may experience temporary losses, but those who hold positions will ultimately be eliminated by the market.

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