At different stages of life, our experiences and insights can greatly change our thoughts.
It is the same in the speculative market. From the moment I first entered this market to the first, second, and third years, I have had different feelings each year, and my understanding and experience of speculative trading have deepened. Only through constantly reflecting on and summarizing my thoughts about the market over the years have I gained insights.
Today, I would like to share some insights from my experience in the speculative market for everyone's reference.
Success equals small losses plus various profits accumulated over time.
Avoiding large losses is simple: survival is the first principle. When there is danger that threatens this principle, abandon all other principles.
The way of trading is to defend an undefeated position and attack the enemy you can win.
Many people perform very well in simulations, even doubling their investment in just a few weeks. However, once they start trading with real money, they often lose money. During this time, their most common response is to continue researching technical analysis methods, constantly trying to improve their success rate, hoping to make money this way. In reality, this approach is a detour and unnecessary. Generally, technical analysis accounts for only about 20% of overall trading skill, and its importance is not significant. Many experts have low success rates but can consistently make money. If you performed well in simulations, it means your skills are very good, and there is no need to research further. Instead, you should focus your energy on other aspects, such as capital management, increasing positions, grasping long-term trends, etc.
You must hold onto your good cards and reduce your bad cards. If you cannot hold onto your good cards, how can you compensate for the losses caused by the bad cards? Many quite good traders end up giving back all their earnings because they refuse to stop trading when they are losing money. When I am losing money, I tell myself: you cannot continue trading, wait for clearer market conditions.
When you have good cards, you must have the patience to hold onto them; otherwise, you will never be able to make up for the money lost from bad cards. Many traders often make the mistake of trading too frequently. They do not select appropriate trading opportunities. When they see market fluctuations, they want to jump in, which is akin to forcing themselves to trade rather than patiently waiting for the right trading opportunity.
We are able to profit because we have patiently done a lot of work before entering the market. Many people, once they are profitable, become complacent with their trades, causing them to trade more frequently. The subsequent losses will overwhelm them, leading to substantial losses, even losing their initial capital.
Every time I enter the market, I always set a stop-loss point in advance, which is the only way that allows me to sleep peacefully. I always avoid setting the stop-loss point at a price level that the market can easily reach. If you analyze correctly, the market should never retrace to the stop-loss price. If the market reaches the stop-loss point, it means that there was a mistake in the trade.
My worst trade stemmed from impulsiveness. According to my trading experience, the most destructive mistake in trading is excessive impulsiveness. Anyone making trades should base their decisions on established trading signals and never hastily change their strategy due to momentary impulses. Therefore, avoiding impulsiveness is the first rule of risk control. I have been trading for over 8 years, and if I hadn't learned to remain calm early on, I would have been driven crazy by the highs and lows of my trading career. Traders are like boxers; the market can strike you at any time, and you must stay calm. When you are losing money, it indicates an unfavorable situation for you. Don’t rush, take your time; you must minimize losses and protect your capital as much as possible. When you suffer significant losses, your emotions will undoubtedly be affected, and you must scale back your trading and consider your next trade after some time.
Why am I able to achieve such a high profit rate? It is because I fear the market's unpredictable nature. I find that successful traders are often those who are afraid of the market, and this fear of trading compels me to carefully choose the timing of my market entries. Most people do not wait for market clarity before entering; they often enter the forest in the dark, while I always wait until it's light before I go in. I do not predict the direction of market movements before they happen; I let market movements tell me the direction. I only launch attacks when I have chosen absolutely foolproof opportunities; otherwise, I would rather give up. This is my most important trading principle.
Do not let the joy of profits cloud your judgment. The hardest thing in the world is how to sustain profits. Once you make money, you will want to make even more, and in doing so, you will forget the risks and no longer doubt the correctness of your established trading principles. This is the reason for self-destruction; therefore, you must always stay cautious. Be very careful when losing money and even more careful when making money.
Trading strategies must be flexible to respond to market changes, which can demonstrate your highly cautious approach to trading. The most common mistake among traders is that their trading strategies remain constant. They often say: 'What the hell, how is the market completely different from what I thought?' Why should it be the same? Isn’t life always full of unknowns? When your important stop-loss point is broken by the market, it is very likely that you have encountered a volatile market or a trend change. How can you continue with this trend operation at that time? Therefore, you must be very cautious and wait for things to become clearer, rather than hastily continuing to trade.
Before entering the market, calm down and think: consider how many professional skills support you in the market, ponder whether your mindset can withstand the ups and downs, contemplate whether your limited funds can handle infinite opportunities and losses.
Sunken ships at the bottom of the sea have a pile of navigational charts. The most important factor in trading success does not lie in which set of rules you use, but in your self-discipline. Time determines everything. Life is not just a contest of strategies; to some extent, it is also a competition of time and life. If Buffett lived 10 more years and sustained a mere 5% profit each year, his total wealth increase would be enough to dominate the world.
