Traders’ Seven Weapons Series — Discipline: Practical Execution (Part 1)

In the first seven chapters, I talked about discipline, believing, love, strength, throwing knives, not taking the path just because it’s there, and compound interest.

They are the mental arts!

But having mental arts isn’t enough. You also need techniques.

In this chapter, I’ll talk about discipline and practical execution techniques.

## 1. What should a trader record?

The purpose of recording is not to help you remember—it’s so you have evidence when you do a post-trade review.

The core data you should record includes:

· Entry date and time
· Trading instrument (BTC/ETH/XXX)
· Direction (Long/Short)
· Entry price
· Position ratio (as a percentage of total funds)
· Stop-loss price
· Take-profit price
· Close date and time
· Close price
· Profit/loss amount and percentage
· Reason for closing (Why did you exit? Was the stop-loss triggered? Did you reach take-profit? Or did you exit voluntarily?)
· Market environment notes (What was the market like at the time? Any major news?)
· Emotional notes (What was your emotional state before and after opening the position?)

You don’t need to fill in this table completely for every single trade, but at least the “reason for profit/loss” and “emotional notes” cannot be left blank. Because those are the truly valuable pieces of information when you review and reflect.

## 2. How do you decide the contract position ratio?

The Kelly formula is a mathematical model used to calculate the optimal betting ratio given a known win rate and odds. In theory, it’s perfect. But in practice, it’s difficult—because you can’t accurately know your win rate and odds, especially in short-term trading. Many people calculate a position ratio of 10%–20% using the Kelly formula—this is already considered a fairly heavy position size in the contract market.

The law of large numbers says: if your system has a positive expected value, the more trades you take, the closer the results will get to your expectation. But it doesn’t tell you how much to bet on each individual trade.

So the more practical approach is the third one: the fixed-percentage method.

· For each contract entry, do not exceed 2%–5% of your total funds.
· If you’re a beginner or in a recovery period (for example, just after experiencing a liquidation), start with 1%–2%.
· When you’ve had consecutive profitable trades for a certain number of times or over a certain period, you can gradually increase the ratio, but the cap must not exceed 5%.

Why not use the Kelly formula? Because it makes your position size get heavier and heavier during winning streaks, and then a single pullback can wipe out all the profits you previously built up. The fixed-percentage method ensures that, while you have enough sample size, no single trade can destroy you.

## 3. Should spot positions have a stop-loss?

Many people think spot positions don’t need a stop-loss—“Anyway, I won’t sell. It will come back up sooner or later.” This view holds true for some assets, but not for others.

The principle is:

Spot stop-loss is not based on price—it’s based on fundamentals.

If your investment thesis still holds— the project is still operating normally, the track hasn’t died, and the team is still doing work—then a price drop is not a reason to sell.

But in the following situations, you should cut losses on spot:

The project’s fundamentals undergo an irreversible change. For example, the core team disbands, or the protocol is hacked in a way that causes permanent loss of funds, or regulators clearly define it as illegal.
The logic behind your original buy has been disproven. You thought it was “value investing,” but later you find it is actually “narrative speculation.”
You’ve found a better asset. Switching positions is also a form of cutting losses—it’s not “admitting defeat,” it’s “reallocating resources.”

So the prerequisite for a spot stop-loss is: you no longer believe in this asset, or you believe another asset is better—not because the price dropped 20% and you panic-sell.

## 4. Under what conditions should you add to a position?

The premise for adding to a position is not “it has fallen so much that it should rebound,” and it’s not “it has risen so much that if I don’t chase now, it’ll be too late.”

Adding to a position is the confirmation and reinforcement of your original judgment. You can only execute adding when all of the following conditions are met at the same time:

1. Your original judgment logic still holds—fundamentals haven’t worsened, and the narrative for the sector hasn’t changed.
2. The price reaches your pre-set add-on zone—you don’t decide temporarily to add; you’ve already written: “If it drops to X, add. If it breaks Y, add.”
3. Your total position ratio hasn’t exceeded the limit—no single coin exceeds 15% of your total funds, and the total across all contract positions does not exceed 20% of your total funds.
4. At least 7 days have passed since your last add-on—this prevents you from continuously adding driven by emotions, which can trap you into “averaging down your cost.”

## 5. In what cases should you not set a stop-loss on contracts?

In 99% of cases, you must set a stop-loss on contracts.

The only situation where you can “not set a stop-loss” is when the position is so small that even if it goes to zero, it won’t affect your emotions or the structure of your account.

Many people use “not setting a stop-loss” to prove that they are “firmly bullish.” But contracts have time value, funding rates, and liquidation mechanisms. When you “don’t set a stop-loss” on a contract, in essence you’re using an expiring contract to bet on a “long-term direction.”

If you truly believe in the long-term direction, you should express your judgment with spot—not with contracts.

## 6. In what cases should you close a contract position?

There are only three situations for closing:

1. Reaching the pre-set take-profit level. This is the healthiest way to close. You follow the plan without emotion.
2. Reaching the pre-set stop-loss level. This is the most painful way to close, but it’s an action you must carry out.
3. The market environment changes drastically in ways you couldn’t predict—for example, sudden policy changes, a black swan event, or liquidity drying up. In that case, you need to manually terminate the trade when the “plan fails.”

Special note: At any time, when your emotions start to override your judgment—such as when you become anxious, can’t sleep, or keep staring at the order book—you can choose to close the position even if the price hasn’t reached your stop-loss or take-profit level. Because what you lose isn’t only a trade—you also lose your ability as a trader to make judgments.

## 7. What should your expected monthly profit be?

There is no standard answer to this question. It depends on the size of your principal, your risk tolerance, and how frequently you trade.

But there is one reference line you can use:

Monthly profit target = 3%–10% of your principal.

If you exceed 50% for two consecutive months, it means you’re lucky—or your risk exposure is too high.
If you’re below 10% for two consecutive months, it suggests your system may need adjustment, or the market environment isn’t suitable for your current strategy.

For example: if you have 10,000 u in principal, your monthly profit target can be set to 300-1000U. Converted to per day, that’s about 10–35U.

It doesn’t look like much, but the power of compounding lies in consistency. If you can achieve 5% every month, then after one year it’s 60%, after three years it’s 180%, and after five years it’s 300%. That already exceeds the performance of most institutions.

## 8. What should you do after you reach your profit target?

Once you achieve the profit target ahead of schedule in a given month, execute the following actions:

Withdraw the profits and buy spot.
(For example, my on-chain practice on this account: I entered with 200 US dollars. After a week, I profited 40% US dollars. For the spot portion, the buys are JTO; I earned 3u with 100 US dollars, then lost 5u on the second time. I judged that TAO had more opportunity, so I switched to TAO. The contract profit was 30 US dollars, and all of it was used to buy FET. At the same time, the contracts went long on link and ETH.

This means: if your goal is 5% monthly profit and you achieved it on the 15th, then immediately transfer that 5% profit out and buy spot (BTC/ETH/stablecoin wealth management products, etc., or buy an altcoin you’re bullish on). After that, you only have “principal” left to continue trading.

The significance of this action is:

It gives you a mechanism to “lock in profits” permanently.
It pulls you out of the “casino mode” of the contract market and back into the “asset allocation mode.”
It ensures that when the next black swan arrives, at least part of your assets won’t be affected.

After you transfer your profits to spot, you can face the market with a new mindset: your principal is back. You’re participating in the market using “profits,” not risking your entire net worth.

The seven weapons are the mental arts; this article is the moves.

The mental arts tell you why you do it. The moves tell you exactly how to do it.

If you only learn the mental arts and don’t learn the moves, you’re just a daydreamer. If you only learn the moves and don’t learn the mental arts, you’re reckless.

And the real people who survive in the market are those who understand both the mental arts and have mastered the moves.

This time, if Ethereum can hold steady at 1800 US dollars, there’s a possibility of continuing to break through to 2000 US dollars. If it can’t hold, ETH will still turn toward below 1500 US dollars.