The way to survive in the trading market: the practical application of the crocodile law

Whether it is the stock market, foreign exchange market or futures market, traders always face various risks and challenges. In order to survive and make profits in this uncertain environment, it is particularly important to master some effective trading rules. Among them, the “Crocodile Principle” is a trading technical rule worth in-depth discussion and learning.

Definition of the Crocodile Law

The crocodile law, also known as the “crocodile effect”, originates from the behavioral pattern of crocodile predation. When a crocodile bites a part of its prey, if the prey struggles, the crocodile will bite it tightly, and even bite more parts of the prey at the same time until it is completely swallowed. The meaning of this rule in trading is that when a trader finds that his or her trading is losing money, if he or she tries to recover the losses through more trading or adjustment strategies, he or she will often fall into greater difficulties and may eventually lead to greater losses.

Core idea of ​​the crocodile law

The core idea of ​​the crocodile law is “stop loss”. Stop loss is a basic skill in trading and an important rule to ensure that traders survive in the risky market. When a trader finds that his trading deviates from the direction of the market or shows obvious losses, he must stop the loss immediately and there must be no delay or luck.

The importance of stop loss is that it can help traders control risks and avoid losing multiple previous profits due to a large loss. In the trading market, human nature is inherently weakPoints, such as greed, fear and fluke mentality, often unconsciously affect traders’ operations. Strictly abide by stop loss discipline is the key to overcoming these weaknesses and maintaining rational operations.

Practical application of the crocodile law

In the stock market, the application of the crocodile law is particularly obvious. When traders find that their stock positions have shown a significant decline and the downward trend has been established, they should sell the stock immediately to avoid further losses. Even if stocks may rebound in the future, the purpose of stop loss is to control risks, rather than pursue profit maximization.

Similarly, in the foreign exchange and futures markets, the crocodile law also has important guiding significance. Traders should set reasonable stop loss points based on their own risk tolerance and trading strategies. Once the market trends touch these points, stop loss operations should be decisively performed to avoid greater losses due to hesitation and delay.

Philosophical revelation of the crocodile law

The crocodile law is not only a trading technology law, but also contains profound philosophical inspiration. It tells us that when facing difficulties and challenges, we sometimes need to learn to give up and sacrifice. Just as when a crocodile bites part of its prey, the prey needs to decisively give up the bitten part to preserve the whole, traders also need to learn to stop losses in time in trading to protect their principal and profits.

In addition, the crocodile law also reminds us to be calm and rational. In the trading market, emotional operations often lead to greater losses. Therefore, traders should learn to control their emotions and keep a calm mind to deal with market volatility and risks.

The Crocodile Law is a simple and effective trading technique that teaches us how to survive and make profits in a risky market. By strictly abide by stop loss discipline, we can control risks, maintain rational operations, and obtain long-term stable returns in the market. I hope every trader can deeply understand and apply the crocodile rules to make their trading smoother.