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I’ve seen far too many people get wrecked by trading. The root cause isn’t that their technical skills are inadequate, but that they’ve never calculated the win rate of their trading strategy. Many people trade swings with an absurdly low win rate, and can suffer more than ten losing streaks in a year. If two losing streaks happen to overlap, their account will basically be wiped out.

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The essence of trading is risk management. As long as you build solid risk controls, even when you suffer consecutive losses, your total drawdown will never exceed 10% to 15%. Then, when you have a winning streak, you can naturally earn substantial profits, or even double your account. Many people lose so much that they collapse because they fail to hold this line.

Why say that 15% is a warning line? Because once a person suffers losses exceeding 15%, their mindset immediately collapses: they start using oversized positions to gamble on recovering their losses, stubbornly holding against the trend, trading without stop-losses, refusing to admit defeat, and frequently opening positions at the wrong levels. As for those teachers who teach you to “fix your mindset” every day, I think it’s all nonsense.🥚
When your account is down 20% or 30%, you’re already desperate to make it back. Telling you to “忍着” at that point is completely useless.
Real risk management means never touching human weaknesses, rather than challenging them.

Every strategy and indicator has a win rate and a loss rate; you can’t calculate based only on the win rate.
For example, if you trade swings with a risk-reward ratio of 1:2 or 1:3 and a 30% win rate, the probability of two consecutive losses is 49%, three consecutive losses 30%, four consecutive losses 21%, and five consecutive losses 14%. In 100 trades, there is a 14% probability of suffering five consecutive losses. If you set the risk per trade at 3%, five consecutive losses will directly exceed 15%, which has nothing to do with a problem in the trading system.

Why can some people make money even with the simplest methods? Because they have fully calculated their loss rate and capped total drawdown at 15%. No matter how crude the method is, they can still make the money back through winning streaks.

The core logic of trading is particularly simple: control drawdown during losing streaks and follow the rules during winning streaks. Too many people get it backward. During winning streaks, they blindly raise their expectations, wanting to earn more even after making profits; during losing streaks, they don’t do the math, and only realize what’s happening after their account has drawn down 30% or 40%. By then, their mindset has completely collapsed and their trading naturally becomes chaotic.

Once risk management is in place, the second thing to understand is that there is no infinite compounding; so-called “compound interest” is essentially “compounded losses.”
Why? Because people have limited tolerance: a 15% loss on 100 yuan is 15 yuan, a 15% loss on 1 million yuan is 150,000 yuan, and a 15% loss on 10 million yuan is 1.5 million yuan. Many people don’t calculate relative drawdown; they only calculate how much money they’ve lost, and then collapse as soon as they do the math.

Compound interest is merely an idealized mathematical state. Everyone has their own capital threshold: some people can steadily grow 10,000 yuan to 30,000 yuan, and 30,000 yuan to 50,000 yuan, but once they reach 100,000 or 200,000 yuan, they can no longer trade well.
Take me, for example. Whether I have 50,000, 100,000, or 150,000 yuan, I always trade only 2 to 3 lots. If I increased my position proportionally, a 15% drawdown could directly cost me 100,000 yuan, and I couldn’t handle it.

Don’t believe the nonsense about “training yourself to handle large amounts of capital.” You don’t need to challenge human nature; just respect it.
If you’re Zhang San and you trade 5,000 yuan steadily, withdraw half when it reaches 10,000 yuan, and always leave the 5,000 yuan principal to compound
If you’re Li Si and your trading is most stable with up to 70,000 yuan, but becomes distorted beyond that, withdraw 50,000 yuan once it reaches 70,000 yuan and start over with 20,000 yuan.

Trading is a job, something you have to do every day, not a get-rich-overnight legend. If you fully understand these two points, it will be more useful than learning any number of technical indicators.
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