A,

Imagine if you fell into an alligator pit and an alligator bit your foot, what should you do?

Suppose an alligator bites our foot, and if we try to free it with our hands, the alligator will bite both our foot and hand. The more we struggle, the more we get bitten. Therefore, if an alligator bites our foot, our only option is to sacrifice the foot.

If you've watched "The Walking Dead," you've probably seen someone whose arm was bitten by a zombie. To prevent them from turning into a zombie, their companions resort to the brutal act of amputating the arm to survive. This is essentially the Alligator Effect. You could also call it the Zombie Effect.

As the wise say: "When faced with two evils, choose the lesser; when presented with two benefits, choose the greater." Seeking advantages and avoiding harm is the essence of letting go.

This teaches us a profound lesson: we must cut losses timely.

From a market perspective, this principle translates to: When you realize you've made a mistake, cut your losses immediately!

No more excuses, hopes, reasons, or any other actions—exit the market at once! In fact, whether in stocks, forex, or options trading, the techniques are similar in this regard. Surviving in the securities market sometimes requires patience and confidence, but patience and confidence should not equate to wishful thinking. Aren't investors who fail to cut losses precisely those who lose due to wishful thinking?

For instance, in the stock market, the Alligator Rule means: When you find your trade going against the market's direction, you must cut losses immediately without any delay or wishful thinking.

B,

Volatility and unpredictability are the most fundamental characteristics of the market. They are the foundation of the market's existence, the source of trading risks, and an unchangeable feature of the market.

The trading process inherently lacks certainty. All analyses and predictions are merely possibilities, and trades based on these possibilities are naturally uncertain. Uncertain actions require measures to control the expansion of risks, which is how stop-loss mechanisms came into being.

Cutting losses timely is a natural response in trading, not something artificially created. It is an instinctive reaction for investors to protect themselves. The market's uncertainty makes stop-loss both necessary and important.

Successful investors may have different trading styles, but cutting losses timely is indeed a common trait that ensures their success. The world-renowned investment master George Soros once said, "Investment itself has no risks; uncontrolled investment does."

Learning to cut losses timely is far more important than making profits. Preserving capital is always the top priority in investing, while profits come second. Establishing a reasonable stop-loss principle is highly effective, and the core of a prudent stop-loss principle lies in preventing losses from escalating.

Understanding the importance of cutting losses timely is crucial, but it's not the end goal. In reality, there are countless examples of investors setting stop-losses but failing to execute them. Therefore, truly implementing timely stop-losses is what matters.

In the market, tragedies of being wiped out occur almost daily. Why is cutting losses so difficult? There are two reasons:

First, the influence of investors' wishful thinking. Some investors, despite recognizing that the trend has broken, hesitate excessively, always wanting to wait and see, causing them to miss the best opportunity to cut losses.

Second, executing a stop-loss is a painful and bloody process, a challenge and test of human weaknesses.

To summarize, whether in the stock market or other endeavors, the Alligator Rule is: When you find your actions deviating from the market's direction, you must cut losses immediately without any delay or wishful thinking.

If we make a mistake and realize it, we must stop immediately—no more excuses, hopes, reasons, or any other actions. Otherwise, we will plunge into greater trouble and errors, leading to even more severe consequences.

Each of us must learn to let go. In life, unfavorable circumstances sometimes arrive unexpectedly, catching us off guard and causing chaos or even significant losses. In such moments, staying composed and proactively sacrificing partial interests to preserve overall interests is the wisest choice.