Hard Lesson from the Long Ear: Why Stop Loss is the Trader's True Weapon

Seeing friends’ positions turn red night after night is a painful experience—starting from a loss of 40,000 units of oil, then briefly returning to break-even, then losing another 80,000 in the past month, until finally reaching a red figure of 86,000 units of oil. This story isn’t just a personal tale but a common picture among many traders who still have “long ears”—those who can only hold positions but cannot cut losses when necessary. What’s the difference with disciplined traders? They have one thing that makes a life-or-death difference: a clear stop-loss plan.

Real Story: From Minus 40,000 to Minus 86,000 Oil

This friend is someone who talks to me every day about market movements. This morning, his loss was “only” around 74,000. But by tonight, that number had swollen to 86,000. And as is often the case in crypto markets, the next day the price actually rose higher—right above the exit point he should have taken yesterday. This is a hallmark of traders without a solid exit plan.

Actually, I’ve shared risk management plans based on years of experience. When I see how someone trades, I can immediately tell their shortcomings. But most traders lack two things: peace of mind and consistent discipline.

Long Ears vs Strict Discipline: Comparing Two Types of Traders

This friend is a classic example of a “long ear”—a trader who refuses to cut losses. When the position is small, he can still control himself. But when the position grows and turns red, his behavior changes drastically. Instead of cutting losses, he keeps adding margin. His reason? “It will rebound later.” This mentality is the most profitable for market makers.

In contrast, disciplined traders:

• Enter positions after identifying support and resistance
• Execute stop-losses without emotional influence
• If adding to a position (averaging down), keep stop-losses tight
• Take profits when targets are hit, not wait for losses to “recover”

My friend is different. When the position drops 5-10 points, he immediately adds more. Adding to a position isn’t wrong, but adding without a stop-loss is a fatal mistake. I’ve repeatedly told him to be disciplined: “Don’t add if your target is only 50-80 points, and if you do, you must have a stop-loss.” But those words only go in one ear and out the other.

Effective Risk Management Strategies

How many points are realistic targets for averaging down? At least 50-80 points for short-term scalping. This isn’t an arbitrary number—it’s a calculation considering market volatility and a healthy risk-reward ratio. When the market is volatile like this, the right strategy is:

1. Small Position Sizes: Small losses are easier to recover than large ones. Financial trauma from big losses can affect a trader’s psychological capital for weeks.

2. Non-Negotiable Stop Loss: This isn’t optional; it’s a prerequisite. Traders relying on “hoping the price will turn” always lose against traders with stop-losses—even if those traders are “just gamblers.”

3. Stable Mental State: During losing streaks, the best decision is to reduce position size, not increase. Conversely, when the timing is good and chart setups are perfect, then you can scale up.

4. Don’t Ignore Market Structure: Recent days have shown an unusual one-sided downtrend. Usually, markets don’t move like this—more often, there are rebounds and sideways movements. Traders who ignore market phases will get caught by external movements.

New Year, New Mindset: Small Positions Save Lives

As the new year approaches, my main focus is building a portfolio with smaller positions. Why? Because small losses won’t shake your mental state or mood. When you lose a lot at once, recovery isn’t just about profit; it’s about psychological reconstruction, which is much harder.

This extreme downtrend cycle has taught many traders the importance of stop-loss. Those who can only hold positions (long ears) are the most affected. Meanwhile, traders like me, considered “gamblers” because I always use stop-losses, actually endure better.

Remember: when making quick money in the market, it’s easy to lose yourself and forget that losing money can happen just as fast. That’s why long ears often end up with unexpected margin calls, while disciplined traders enjoy long-term consistency.

Current Market Data:

• BTC (BTCUSDT Perp): 68,701.4 (+3.74%)
• ETH (ETHUSDT Perp): 2,048.11 (+5.83%)