2026-01-09 12:32:11

Most traders have probably fallen into this trap: seeing unrealized gains and wanting to lock in profits, but once caught in a position, holding on stubbornly, leading to small profits turning into big losses, and the account gradually bleeding out. Almost every newcomer in the crypto space has been affected.

Why does this happen?

Simply put, there's one main reason: being too serious about the win or loss of a single trade.

New traders' minds are always focused on the immediate. If they lose, they can't accept it and refuse to admit defeat, so they keep holding; if they make a profit, they fear giving it back and quickly close the position. Over time, losing trades become your long-term holdings, while winning trades turn into ultra-short-term trades.

But the market doesn't care about your single trade's life or death. What truly determines whether you end up winning big or losing everything is the overall account balance over hundreds or thousands of trades. Human nature is inherently averse to long-term thinking; the brain prefers to focus on short-term gains and losses. As a result, most traders are repeatedly harvested by their own emotions.

Want to break the cycle? There’s really only one trick: force yourself to tame human nature with the risk-reward ratio.

Before placing an order, you must clarify three things: if this trade goes wrong, what's the maximum loss; if it goes right, what's the maximum profit; and whether the risk-reward ratio of this trade is at least greater than 1. As long as the risk-reward ratio isn't advantageous, no matter how good the feeling, you must hold back from entering.

This is the first hurdle in trading, and also the easiest to overlook.

It's actually very simple: every trade must have a clear stop-loss point, and the take-profit level cannot be lower than the stop-loss. If the take-profit isn't hit, you absolutely must not exit early. This way, you can avoid most people's trap of "small profits and big losses." There’s no universal formula for the specific risk-reward ratio; it entirely depends on the current market environment.

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BlockchainRetirementHome

· 01-09 12:58

Honestly, I didn't really pay attention to the risk-reward ratio before, until my account was worn down to the point of unbearable pain and I finally woke up. People are greedy; they want to run after earning five points, but can endure a loss for a month. What's the final result? The small profitable trades have long been closed, while the losing trades have become permanent holdings, which is quite ironic. The article is right; the market doesn't care about your individual trades, it cares about your overall win rate and risk-reward ratio. Now, before I place each order, I always calculate the expected value of the trade. If the expected value isn't positive, I won't make a move. Although this reduces my trading frequency, my account finally isn't being repeatedly drained. Stop-loss and take-profit should be set simultaneously; you can't just focus on making money and ignore risk management, or you'll eventually get caught in a black swan event.

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DarkPoolWatcher

· 01-09 12:54

That's so true, I was just cut like that. If I had known earlier, I should have strictly adhered to the take-profit line.

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GasFeeNightmare

· 01-09 12:41

It's the same old argument about the risk-reward ratio, which isn't wrong, but very few can actually achieve it. My biggest lesson is that I know I should cut losses but just can't bear to do it, and in the end, I reverse and go short, ruining myself.

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DefiSecurityGuard

· 01-09 12:39

⚠️ CRITICAL: This entire "risk management" framework has a fatal flaw - it assumes retail traders can actually stick to their rules when liquidation notices start flooding in. I've analyzed 1,847 failed trading accounts this quarter alone. Pattern's always identical: perfect plan on paper, complete emotional breakdown under market pressure.

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