Why do you need to stop-loss when trading? Today a student couldn’t wrap his head around it, so he asked me specifically. He bought LAB around 5, it dropped, and he stopped out.

I used LAB as an example to explain the importance of stop-loss. Of course, for BTC you can choose not to use stop-loss—it’s your trading system. But for altcoins, you must use stop-loss.

I remember that when I was livestreaming, I entered around LAB 5–6. When it dropped to around 4, I exited. After that, I never touched this coin again. The lowest it has dropped to now is 0.2 over the course of a week. If I had gone long with 1x leverage, or done spot—entered with 1,000 USDT at the 5 level—by now my account would be down to only 40 USDT, a loss of 960 USDT. If I had gone short with 1x, this coin often goes crazy during the downward move, rallies 1x or more, and you’d get liquidated. As for spot, I won’t even mention it—if you do 1x in futures, then don’t do it; it makes no sense!

If I hadn’t stopped out, losing 960 USDT, and instead stopped out at 4, I’d only lose 200 USDT, leaving 800 USDT. Suppose it then fell to 0.2 and I averaged down with another 1,000 USDT—the balance would become 1,040 USDT. It would basically need to rise about 2x just to break even. If I bought 800 USDT, then I’d break even with only a 20–30% rise, and there wouldn’t be any new capital added. If it goes up, it’s fine. But if it keeps dropping to 0.02, then the earlier 1,040 USDT would turn into 104 USDT. I bought 800, it dropped 10%, and after the stop-loss I still had 720 USDT. This is why stop-loss is important: preserve your living capital, so you can turn it around in the future.

I’ve always emphasized that you have to abandon the dead. Altcoins must carry stop-loss, whether it’s futures or spot. Many spot friends always have a mindset of FOMO: if I don’t buy, then I don’t lose. Just let it drop. When an altcoin drops 10x or more, basically it can’t be recovered. I even did specific statistics—everyone can do their own stats too. Unless this coin is extremely “妖艳” (very wild), which is very rare—the key is that it’s not replicable. This time you got your position back; next coin, you won’t have such good luck.

Trading losses are normal. You must be willing to lose. On the road to making money, first learn how to lose correctly—get your posture right and your actions right!