Part One: The Foundation of Survival—Risk and Capital Management (This is 1, others are 0)

1. Single Trade Risk Limit: The maximum expected loss on any single trade must never exceed 10%-20% of your total capital. This is an iron rule. For example, if you have 100,000 yuan in your account, the maximum loss per trade should be 10,000-20,000 yuan. This ensures that even with consecutive losses, you still have principal to continue trading.
2. Position Sizing: Before entering a trade, determine your position size based on your stop-loss level and the “single trade risk limit.” Formula: Position = (Maximum Acceptable Loss) / (Entry Price - Stop-Loss Price). Avoid the impulse of “buying more when feeling bullish.”
3. Total Risk Exposure: When holding multiple positions simultaneously, ensure that the total risk exposure (the total potential loss if all stop-losses are hit) remains within controllable limits (e.g., within 5% of total funds).

Part Two: The Spirit of Execution—Planning and Discipline

1. Always trade your plan: Before entering a trade, write down in black and white (or digital document):
· Reason for entry: Based on signals and strategy, not feelings.
· Entry price:
· Stop-loss price: Must be set! This is the insurance you buy for this trade.
· Target price/Exit strategy: Fixed take profit or trailing stop? When to reduce position?
· Position size: (Calculated according to Part One rules).
2. Avoid impulsive decisions during trading: Once the plan is made, execute it strictly unless the market presents unexpected situations explicitly covered in your strategy. Emotions during trading are the least reliable.
3. Make good use of trading logs: Record every trade (including missed ones). Document your plan, execution, profit/loss, and your emotions and thoughts at the time. Regularly review to identify recurring mistakes and patterns for optimization.

Part Three: The Path of Cognition—Markets and Self

1. No “Holy Grail”: Accept that no strategy can win forever. The market is fundamentally a probabilistic game. Your goal is to build a system with positive expectancy and to execute it consistently over the long term.
2. Profit and loss share the same origin: The strategy you use to profit will also cause losses. A single stop-loss does not mean your strategy has failed; a single profit does not mean you are a genius. Shift from “correctness of individual trades” to “long-term overall probability.”
3. Focus on the process, not the result: A trade well handled (strictly following risk management) is a “good trade,” even if it results in a loss. A poorly operated trade that makes money is a “bad trade.” Reward correct behavior, not random outcomes.
4. Continuous learning, but keep it simple: Study market structure, technical analysis, fundamentals deeply. But ultimately, your trading system should be simple enough to execute effortlessly. Complexity does not equal effectiveness.

Part Four: The Anchor of Mindset—Long-termism

1. Protect capital above all: In the early stages of trading, your primary goal is not to make big money but to survive and avoid major losses. As the saying goes, “A green mountain remains, no need to worry about firewood.”
2. Beware emotional traps:
· After profits: Prevent overconfidence, relax standards, and increase position sizes.
· After losses: Prevent revenge trading, frequent opening of positions, and attempts to “immediately recover losses.”
3. Take regular breaks from the market: If experiencing consecutive losses, emotional imbalance, or extreme market chaos, force yourself to stop trading for a few days. Clear your mind and revisit your trading plan and logs.
4. Trading is a serious career, not gambling or entertainment: Trade with money you can afford to lose. Manage your trading like running a business: with a budget (capital management), a process (trading plan), and review (trading logs).

A Final Summary

Top traders are not prediction masters but masters of risk management and discipline enforcement. They use cold rules to restrain human nature’s heat.

These suggestions may seem simple, but each requires great perseverance and self-control to practice. Wishing you steady progress on this most challenging path.