Cutting losses or holding on for profits, these are decisions most traders have to face. It sounds simple, but in reality, it's the hardest part of trading. I notice that most people fall into the same psychological trap: when the market is rising, they’re afraid to sell early and take a loss, but when the market drops, they comfortably think "it will go back up anyway" and hold on, deepening and prolonging the loss.

I have tried many methods and want to share the most effective approach I’ve found. First is cutting losses. Not randomly cutting, but setting a stop-loss order right from the moment you enter the trade. The secret is to calculate the position size so that when you hit the stop-loss, the loss only accounts for a maximum of 2% of your account balance. There are many tools on Google called "Position size calculator" that help you quickly calculate without complex math. With this principle, even if you lose 10 consecutive trades, you only lose 20% of your account, still giving you a chance to recover.

As for holding on for profits, it’s different. According to Pareto’s principle, only 20% of trades are big winners that generate most of the profit, while 80% are small losses or break-even. To achieve those big wins, the only way is to hold on with a trailing stop. I find the two best indicators for this are PSAR and EMA. Try applying them right away and let me know the results; you’ll definitely see a difference.