Why do we hold onto profitable orders while stubbornly clinging to losing ones?

1. Psychological Aspect: Driven by Fear and Greed

1. When losing - the illusion of "hope" and loss aversion
· Loss Aversion: Behavioral economics proves that the pain of loss is far greater than the pleasure of equivalent gains. When your position shows a floating loss, you feel real pain. Closing a position means that the "pain" becomes a given fact, which is something the brain desperately wants to avoid.
· The illusion of "hope": You are unwilling to admit failure, and deep down you always hold onto the fantasy that "the market will come back, as long as you can hang on a little longer." You treat "holding on" as "perseverance" and "not closing positions" as "not having really lost." This is actually a form of wishful thinking, substituting hope for trading strategy.
· Anchoring Effect: Your brain will stubbornly "anchor" to your opening price. You feel that as long as the price returns to that position, you will be "free". This prevents you from objectively assessing the current trend of the market, and all analysis serves the obsession of "how to break even" rather than "what the market is doing now."
2. Profit Taking - The Dominance of "Fear" and Securing Gains
· Fear of profit withdrawal: When the position starts to be profitable, you immediately begin to worry: "What if I lose the profit? It's better to close it first; a little gain is better than nothing." This fear of losing already realized profits prevents you from holding the correct position.
· Uncertainty: The cryptocurrency market is highly volatile, and a sudden spike can turn unrealized gains into losses. This immense uncertainty amplifies your anxiety, prompting you to rush to convert "unrealized gains" into "realized gains" in search of psychological security.
· The curse of "locking in profits": This is a deeply rooted misconception. You think that putting money in your pocket makes it safe, but in reality, you are cutting off the growth of profits, violating the core principle of "letting profits run."

2. Cognitive and Strategic Level: Lack of Systematic Trading Discipline

1. No trading plan
· Your trading is based on feelings, news, and moods, rather than a detailed plan. A complete trading plan must include:
· Entry Point: Why open a position here?
· Stop-loss point: How much money do I have to lose before I admit I'm wrong and exit? This is your most important "fuse."
· Take profit point/Target price: Where the market moves, my logic is fulfilled, can I close the position?
· Position Size: How much capital do I invest in this trade? (Usually a fixed percentage, such as 1%-2% of the principal)
· Not having a stop-loss plan is equivalent to planning for liquidation.
2. Risk and Position Management Out of Control
· Over-leveraging: Using high leverage (such as 20x, 50x, 100x) makes the account unable to withstand even a slight normal market fluctuation. A small reverse fluctuation can trigger huge losses, putting you in an instant dilemma of "hold on or get liquidated."
· Overleveraged position: Investing a large portion or even all of your funds in a single trade. This can lead to an extremely fragile mindset, as the success or failure of this trade directly determines your "life or death," making it impossible for you to make calm decisions.
3. Lack of respect for the market and cognitive errors
· "The market is always right": You always feel that you are right and that the market is wrong. When the market trend is contrary to your judgment, you do not choose to follow the market, but rather choose to confront it, using "stubbornness" to prove that you are right.
· Underestimating the power of trends: The cryptocurrency market often experiences one-sided trends, and once a trend is established, its strength and duration can far exceed your imagination. What you think is a "pullback low" may just be halfway up the mountain. Stubbornly holding onto a one-sided trend will inevitably lead to liquidation.

3. Mechanism Level: The "liquidation mechanism" of the contract is an invisible driving force.

The forced liquidation (margin call) mechanism of contracts is like a ticking time bomb, constantly applying psychological pressure on you. You watch helplessly as the margin ratio continues to decrease, and this visual and psychological sense of oppression can lead you to make irrational decisions such as "adding margin" or "praying for a reversal" when you should rationally cut your losses.

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How to solve? The transformation from "retail investor" to "professional trader".

1. Establish and execute a strict trading discipline
· Unconditional Stop Loss: Treat stop losses as part of the trade, as natural as fastening a seatbelt when driving. Set the stop loss order (hard stop loss) at the very moment you place the order, and do not let emotions interfere with your execution.
· Profit and Loss Ratio Principle: Ensure that in every trade, the potential profit is greater than the potential loss (for example, aiming for a 3:1 profit and loss ratio). This way, even if your win rate is only 50%, you will still be profitable in the long run.
2. Implement strict capital management
· Reduce Leverage: Always use the lowest leverage you can handle (it is recommended that beginners do not exceed 5x, and experienced traders do not exceed 10x). Leverage is a tool, not a winning or losing hand.
· Fixed Position: Each time you open a position, only use a fixed small percentage of your total funds (for example, 1%-5%), ensuring that even if you have several consecutive stop losses, it won't harm your principal.
3. Develop and refine your trading system
· Write down your trading plan, including all the rules. Then execute it strictly like a robot.
· When making a profit, you can use a trailing stop-loss to protect your profits and let them run. For example, when the floating profit reaches a certain percentage, move the stop-loss to the opening position to ensure that this trade will at least not incur a loss; then, as the trend develops, continuously adjust the stop-loss upwards until the trend reverses and kicks you out.
4. Mindset Training
· Accepting Losses: Losses are a normal cost of trading and a tuition fee that must be paid for success. Top traders also experience frequent losses, but they lose small amounts and make large profits.
· Forget about cost: Do not anchor on your opening price. Your decisions should be based on "how the market will move in the future," rather than "how I can break even."
· Simulated trading practice: If you cannot control yourself, first trade strictly according to your system on a simulated account for 1-3 months until you can execute discipline consistently.

In summary:

You can't hold onto the order, and you suffer losses by stubbornly holding on, essentially because you are trading with "emotions" and "instincts". Successful contract trading requires you to combat your instincts with "discipline" and "system".

This road is very difficult because it is a war with one's own humanity. But as long as you realize where the problem lies and start consciously establishing rules and restraining yourself, you are already on the right path.