In the trading industry, many people discuss winning rate, profit-loss ratio and market judgment. But for traders who have truly experienced market cycles, what determines the long-term viability of an account is often not profitability, but the ability to control drawdowns.

Recently via EagleTrader Chen Shubin, a trader who took the exam, mentioned a keyword many times in the interview - net worth retracement. In his view, the key to whether a transaction can be stable in the long term does not lie in how much money is made in a certain market, but in whether the account drawdown is always within a controllable range.

This is also a trading understanding that he has gradually formed over many years of trading experience.

Five years of transaction accumulation

Chen Shubin has been exposed to transactions for nearly five years. When he first entered the market, he was doing stocks, and it was two years ago that he really started to systematically come into contact with foreign exchange trading.

When asked why he insists on trading, his answer is straightforward: purely because he likes it. "I like numbers, I like trading, I like logic, and I feel the charming experience brought by trading." For him, trading itself is an attraction - numbers, logic, probability, and strategy. The combination of these elements makes trading an activity that is both rational and full of challenges.

Currently, he remains part-time. But for the future, he has not set a radical goal for himself: if he can continue to make a stable profit, he will consider gradually turning to full-time work. For him, whether he works full-time is not the most important thing. The key is still whether he can maintain stable earning power.

In trading decisions, Chen Shubin does not rely solely on a certain analysis method. In his decision-making framework, technical analysis and empirical intuition account for 40% each, and fundamental analysis accounts for 20%. Technical analysis is used to judge the market structure, empirical intuition comes from long-term accumulated market perception, and fundamentals serve as an auxiliary reference. This is a typical decision-making method of experienced traders: relying on both rules and perception.

Positive expectations and retracement control

When asked "What is the key to long-term stable profit in trading?", Chen Shubin gave a very clear answer:

First, the trading system has positive expectations

Second, risk control capabilities, especially the ability to control net worth retracements

Third, the mentality of stable execution of transactions

In his view, if a system itself does not have positive expectations, no matter how good the execution is, it will be difficult to make a profit. But even if the system has positive expectations, if the retracement cannot be controlled, it will be difficult to survive in the market for a long time. Risk control capabilities are the core condition for the long-term operation of a trading system.

Net value retracement: from cognition to discipline

In Chen Shubin's trading system, the management of net value retracement is not a simple stop loss setting, but the embodiment of a complete set of trading thinking.

First of all, it is a realistic understanding of "luck".

He believes that there is indeed an element of luck in trading. "If luck can bring profits, it is also an ability in itself." But regardless of luck, the only thing traders can do is to control the retracement of net worth. As long as the retracement is controllable, the system can continue to operate and profits will naturally be realized in the long term.

Secondly, there is the discipline restriction on "positions".

When it comes to large losses caused by overweight positions, his point of view is very straightforward: "Overweight positions and large losses indicate that the transaction has gone wrong."

In a reasonable trading plan, there should not be a retracement of net worth that exceeds expectations. If the loss is within expectations, just execute as planned; but if the loss exceeds expectations, the best way to deal with it is to "stop the loss as soon as possible".

Third, it is a quantitative understanding of “consistency”.

He gave a unique definition of trading consistency: not the consistency of the execution strategy, but the consistency of the retracement structure.

If the retracement ratio in each trading cycle is relatively close, it means that the system behavior is stable; but if a certain retracement is significantly greater than the historical average, it means that the trading behavior has deviated, and at this time you need to rethink your strategy or execution method.

Fourth is the specific risk boundary.

He set the risk he can bear at 100 points, and the average risk per transaction does not exceed 2%. This quantified boundary turns abstract risk control into executable rules.

The gambler’s mentality changes to trading discipline

Like many traders, Chen Shubin also experienced the liquidation stage. Recalling the trading status at that time, he said frankly that the problems almost all came from the same place: taking orders, adding positions against the trend, not stopping losses, and emotions.

"At that time, I didn't care about the strategy, winning rate, profit-loss ratio. Anyway, I just wanted to win back and fell into the gambler's mentality."

The trading state at that time had completely deviated from the strategic logic and entered a typical "gambler mode": I just wanted to win back the loss, and no longer considered the system rules. This stage has also become a learning process that many traders must go through in their growth process.

Restraints brought by risk control rules

The biggest gain for Chen Shubin from participating in the EagleTrader exam this time is not a certain profit. It’s about the platform’s clear risk control indicators and trading rules.

In his view, these clear risk limits and trading frameworks can, to a certain extent, prevent traders from trading emotionally or losing control of their positions. "There are obvious risk control indicators and obvious rules and regulations to prevent yourself from being cheated in transactions as much as possible."

This kind of institutional constraints also makes transactions closer to professionalindustrialized model.

Advice to traders

At the end of the interview, Chen Shubin shared a very simple but true experience: "There is no end to learning in trading. The most important thing is to find a way that suits you and a way to make profits. The premise is that you must learn the concept of risk control."

The market is always changing, and every trader ultimately needs to find a trading method that suits him. But no matter what strategy is adopted, one premise will never change—risk control must be learned first.

Because only when risks are controllable can a trading system have the opportunity to reflect its true value over time!