Many retail investors have encountered a problem.

Small profits, big losses.

When they test the market with a light position, the probability of making money is very high.

When they bet heavily, the losses are extremely severe.

When the position is fully loaded, another magical phenomenon occurs.

That is, when the stock rises, the gains are always not much, but the losses are heavy when it falls.

It's not easy to make a 10% profit, which may be lost in 2-3 days by a 15% drop, or even more.

The situation of small profits and big losses seems to be a curse, looming over the heads of retail investors.

From the perspective of the main force, to solve the problem of small profits and big losses, one must first understand the logic behind it, where the problem lies.

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Why retail investors always make small profits and big losses, in fact, it is not complicated to explain, mainly the following three points.1. The main force is fishing.

What is the essence of the stock price increase? It is driven by the main force of capital.

But the main force of capital is not a philanthropist; their goal is always to raise the stock price and then sell smoothly.

That is, the main force raises the stock price not to make money for retail investors, but to make money for themselves.

Therefore, there must be a behavior of the main force, called fishing.

There are many ways to fish.

For example, by spreading rumors, a stock that costs 10 yuan is first said to rise to 15 yuan, then to 20 yuan, and finally the target is 40 yuan.

Retail investors buy with a try-it-out mentality at 15 yuan, and then increase their positions at 20 yuan. When the price rises to around 25, the main force may have already sold out and left.

The essence of fishing is to use the temptation of profit to make retail investors take over the position. Once retail investors take over the position in large numbers, as soon as this bait is bitten, it is immediately a case of killing the donkey after the mill is unloaded and running away.

2. The herd behavior of retail investors.The second important reason is due to the herd effect of retail investors.

If only a few scattered retail investors buy, the main force cannot sell smoothly.

The main force also disdains to trap such a small number of retail investors, so they let the retail investors be slightly profitable.

Retail investors do exist a herd effect, that is, most of the ideas of retail investors are similar.

When the stock price starts to be speculated, the number of retail investors who buy in large amounts will increase, and the main force is waiting for such an opportunity.

That is, when a small number of retail investors buy, they can make money.

When most retail investors buy, the main force starts to run away, making most retail investors lose money.

The main force's capital is calculated to be a small loss and a big profit, allowing retail investors to have some floating profits, and then cut down at one stroke.

The herd effect is inevitable because human nature is like this, once the emotions are in place, it will naturally chase the rise and kill the fall.

3. Cognitive bias brought by self-confidence.There is another reason that leads to retail investors making small profits and big losses, which is cognitive bias.

In simple terms, after making a small profit many times, they forget the risk of big losses.

Retail investors are often very confident, thinking that they can make a lot of money.

Cognitive bias leads to retail investors placing bigger bets after making a few profits.

For example, a friend had a 30% return on investment in the first half of the year, and he thought he had found a way to make money.

But from the second half of the year, he has accumulated a loss of 45%, because his method didn't work.

Moreover, when losses begin to occur, he will not take it seriously, thinking it's just bad luck.

It is only after a huge loss that he starts to review his investment methods to see if there is a problem.

In fact, it's not that the investment method has a problem, but there are many trading methods that work in a bull market but not in a bear market.

Or the investment style of the market has changed, and some trading strategies have become ineffective as a result.Can Minor Profits and Major Losses Be Avoided?

From a collective perspective, it is almost impossible for retail investors to avoid minor profits and major losses, as the game of capital is always manipulated by the main force against retail investors.

But in essence, for an individual retail investor, minor profits and major losses can be completely avoided.

As long as retail investors possess a certain main force mindset, this problem will be easily solved.

Firstly, set a stop-loss position.

In fact, the main force also sets a stop-loss, and the main force's entry also starts from testing the market.

But the main force is almost always making minor losses and major profits, because the main force is very decisive about stopping losses.

When he finds that the actual situation of the market is not the same as imagined, he will retreat, rather than hitting the south wall.

Retail investors have a very fatal point, which is subjective judgment and unwillingness to stop losses.When we buy stocks, we all hope for them to rise, and if the stock falls, it means our judgment was wrong.

At this point in time, if you choose to cut your losses quickly, the loss is controllable.

However, if you hesitate and delay, there is a high possibility of incurring a huge loss.

Retail investors always harbor a fluke mentality, hoping that time will bring new rises, not realizing that even if it does rise, it is not the rise they initially anticipated.

A trade without a stop loss is unreasonable, and even value investing requires a stop loss if there is a performance decline.

Secondly, control your position.

Another way to control losses is by controlling your position.

Large losses often occur when the position is heavy.

If your position is only 10%, even if it falls by 20%, the actual loss is only 2%.

Therefore, by controlling your position, you can effectively reduce losses.However, controlling one's position involves many aspects, including diversified investments as well as simply managing one's position.

When a stock incurs a small loss, do not blindly increase your position, and similarly, when a stock makes a small profit, also avoid blindly increasing your position.

The premise of controlling one's position is the willingness to forgo profits in order to reduce one's own risk.

The advantage of heavily investing is the potential for significant returns, but the risk also increases accordingly.

Moderate diversification, coupled with reasonable position control, can effectively mitigate risks.

Thirdly, manage emotions.

To achieve significant profits and minor losses, another crucial point is to manage emotions.

In the way that the main force reaps retail investors, emotions are a very important aspect.

The main force will create the appearance of a stock surge, giving retail investors a false signal that it's too late to get on board if they don't act now.

In the T+1 trading system, the risk of chasing high prices is very significant.Because you cannot sell on the same day you buy, if you take over at a high position that day, there is a possibility of a significant loss.

The low opening the next day can directly trap retail investors, and it is not unusual to suffer a loss of 10%-20%.

The reason why most retail investors rush in is due to a problem with emotional management.

When emotions fluctuate greatly, if you can control your hands and not engage in blind trading, especially chasing rises, you can avoid significant losses.

Emotional stability is an essential quality for stock trading; otherwise, making a profit is extremely difficult.

Fourth, adhere to the strategy.

The last point is the ultimate weapon against small gains and large losses, which is to adhere to the strategy.

Many people may not understand what is meant by adhering to a strategy; it is actually having a plan for buying and selling transactions.

Do not engage in any transactions outside the plan, which is very important.

The biggest taboo in the stock market is to make money beyond the scope of cognition, because a slight carelessness can lead to significant losses.When you are making money, if you do not follow the plan and always want to earn more, you may end up losing more than you gain. When you are losing money, if you are afraid to admit your mistakes and always think that waiting a little longer will turn things around, you may suffer heavy losses. Since you have a strategy, follow it, because the strategy is cold and emotionless, which can avoid emotional trading, manage positions, and avoid being deeply trapped.

The main force has more gains and fewer losses, not only because of the advantages of capital and information, but also because they understand what trading is. Do not always trade with a fluke mentality. Only by sticking to your own strategy and building a good trading model can you get closer to making money.

Retail investors are not without the opportunity to make money, but they need to learn to find their own breakthrough in an unfavorable situation.