Imagine the scene of sailing on the sea.

You may have a powerful vessel - that is your trading system. Holding precise nautical charts and a navigation instrument - these are your technical analysis tools. You can also receive real-time weather alerts - fundamental information is constantly flowing in. But even so, a sudden storm at sea can catch you off guard. This is the reality of the market: the uncertainty of trading is the very nature of this sea.

The price fluctuations at every moment are actually the instantaneous result of a game played by all market participants—including you, me, institutional investors, algorithmic trading, and even unexpected events—based on their limited information, different expectations, and the complex and ever-changing emotions. Will it rise or fall in the next second? It is fundamentally impossible to determine.

So the question arises: in this uncertain market, what do you rely on to make money? The answer is: find those things that you can be certain of and control.

What is controllable? For example:

Tomorrow I will be going out. The weather forecast may not be accurate, but taking an umbrella is always a good idea. No matter how good your driving skills are, you can't prevent an idiot from suddenly appearing on the road, so in addition to mandatory insurance, it's wise to have commercial insurance ready. During an interview, you can't gauge the interviewer's temperament, but if you do your homework in advance and prepare responses for various questions, the outcome is unlikely to be too bad.

Everything requires preparation to succeed, and without it, failure is inevitable. The same applies to trading. Everyone knows that trading involves significant risks, and leveraging increases those risks even more. But ironically, the only thing that can truly be controlled in trading is the risk itself and the amount of losses. As for profits? They naturally come from taking risks, but are much harder to actively manage.

So the essence of trading boils down to two things: one is how to weigh risks, and the other is how to manage losses.

When it comes to a downward reversal, directly going long at the first break of the trend line and going long only after the second dip and rebound during the decline are not on the same risk level. The win rate and risk-reward ratio of the latter will far exceed that of the former.