If we talk about what a trading system cannot do without, it must be stop-loss. But here, we need to clarify— the primary purpose of a stop-loss is not to increase your win rate, but to prevent a single misjudgment from wiping out your account. There's an old Wall Street saying: "Losses are the cost of trading, but the ability to manage losses determines how long you can survive." Do you see the fundamental difference between professional traders and retail investors? It’s right here.

So, how to scientifically set a stop-loss? Randomly choosing a percentage is the dumbest approach. The correct idea is to find the confirmation point of "invalid signals." For long positions, the stop-loss should be placed just below key support levels—such as the lower boundary of previous trading zones, important moving averages, or Fibonacci retracement levels. Leave some room for normal market fluctuations and avoid being shaken out by daily noise.

There’s also a hardcore tool: the Average True Range (ATR). When market volatility is high, widen the stop-loss accordingly—since the volatility is already large, there’s no need to get shaken out by false moves. When volatility decreases, tighten the stop-loss. The most practical formula is: Long position stop-loss = Entry price - 2×ATR value.

Never rely on "mental stop-loss," which is when you see losses piling up and secretly move your stop-loss down out of regret. This approach is just like not setting a stop-loss at all, and completely ruins risk management discipline.

Psychology is the real challenge. "Hoping" and the "sunk cost effect" are two major poisons. When the price is approaching your stop-loss level, your brain automatically whispers: "Hold on, maybe it will rebound." And what happens? Small losses turn into bigger losses, and you end up kicking yourself. You must understand that a stop-loss is not a failure; it’s a safeguard to keep you alive and enable you to make the next trade.