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About Entry Positions
There are many articles discussing entry points in the market, but I rarely publicly share my actual entry references. The reason is simple: any technical indicator has its applicable scope and can fail; the key is not in quantity but in mastering one thoroughly.
The fundamental principle of entry is only one sentence:
Buy at support, sell at resistance.
There are many ways to judge support and resistance, such as moving averages, Bollinger Bands, Fibonacci retracement, previous highs and lows. Personally, I most often use Bollinger Bands, which are simple and straightforward.
In a bullish trend, focus on the 4-hour Boll lower band support;
In a bearish trend, focus on the 4-hour Boll upper band resistance.
Some may ask, what if the market is very strong and the 4-hour level shows no pullback? Should I just miss the opportunity?
My approach is to build positions gradually.
Suppose the maximum planned investment is 10,000U:
- When breaking out, buy 30% first,
- After a pullback confirmation, add the remaining 70%.
There are two benefits to this approach:
First, it prevents missing the trend entirely while waiting for a pullback;
Second, even if a pullback occurs, it allows adding positions at relatively advantageous levels, reducing emotional trading.
But one point must be emphasized repeatedly—
Whether judging the direction or choosing entry points, it is fundamentally a probability event, and 100% accuracy is impossible.
Once the judgment is wrong, the only correct action is to cut losses.
About Take Profit and Stop Loss
Take profit and stop loss determine whether you can survive in the market.
In a complete trading cycle, as long as total profit exceeds total loss, the system is positive. It’s not complicated to achieve, as long as the following conditions are met:
- Each stop loss ≤ 5% of total capital;
- Each profit ≥ 5% of total capital;
- Overall win rate > 50%.
As long as the risk-reward ratio is greater than 1 and the win rate is within a reasonable range, profitability is guaranteed.
Of course, you can also use a high risk-reward ratio with a low win rate, or a low risk-reward ratio with a high win rate; different paths, same core.
The formula for total profit is simple:
Initial capital × (average profit × win rate − average loss × loss rate)
In my trading system, I only take positions when the market has an expected volatility of over 30%, so the risk-reward ratio is naturally higher. This is one of the core reasons why long-term gains can be achieved.
But in reality, many people do the opposite:
They rush to take profits when they are profitable,
Hold on stubbornly during losses.
Knowing it’s wrong but unable to stop.
This is not a technical issue but a human nature problem.
Greed and fear must be constrained by proper capital management.
About Capital Management
Many say to keep positions light, but what does that mean?
Here’s an actionable standard:
Maximum loss per trade ≤ 5% of total capital.
Exceeding 5% is considered heavy position,
Below 5% is considered light.
Of course, everyone’s psychological tolerance and trading skills differ, so the ratio can be adjusted, but this standard is most friendly to beginners and easiest to stick with long-term.
Let’s also discuss simple interest versus compound interest.
Simple interest has lower risk but slower growth;
Compound interest grows faster but also involves sharper drawdowns.
My strategy is simple:
Trade with simple interest for 30 days, then compound once every 30 days.
This way, you can control drawdowns while still benefiting from the efficiency of compounding.