Let me tell you a secret: how do you judge whether a deal is good or bad?
If you think that a profit is good and a loss is bad, then it is easy to fall into a trap.
The biggest trap in the market is that it sometimes rewards wrong behavior. A randomly operated order may also generate profits.
However, an order that is carefully executed according to the trading system may still result in a loss.
Therefore, if you measure right and wrong based on the results of a single transaction, you will fall into the misunderstanding of result preference. This will ignore the randomness of short-term market conditions. The same entry criteria may result in both profits and losses.
This is what is often referred to as profits and losses coming from the same source.
For mature traders, as long as the trading plan is executed and the trades are made within the system, then the transaction is correct, otherwise it is incorrect.
Of course, the premise is that the trading system has a positive expected value, which requires verification of more than a thousand transactions.
Traders can only control their own behavior, not the market trend. Traders with a high winning rate can still lose money overall, while traders with a low winning rate can still make a profit overall. The key is not the winning rate, it is not about how many times you get it right, but how much profit you make when you get it right and how much loss you make when you get it wrong.
Once your mindset changes, your behavior will change.
Concepts are actually related to people’s desires, and desires will rationalize concepts. Therefore, we must see this clearly and be vigilant.
When people reach a certain stage, they should, to a certain extent, choose what desires they have, rather than being led by their desires.
What are the wrong desires in trading, and what are the right desires? Unrealistic expectations, such as three or five times the return in a few days, hoping to turn things around with just one trade, only taking benefits without taking risks, and hoping that one's luck will be against the sky... These are actually wrong desires.
Don't be led by these desires. People should be the masters of their desires rather than their slaves.
The correct desire is actually a reasonable demand, which means that you can still make positive profits and control the drawdown well after more than a thousand transactions, excluding the element of luck.
Here we need to emphasize the issue of Martingale and its variants, which are also used by many traders. Martingale is profitable in most cases, but in the long run, it is easy to explode in a few transactions or in one transaction.
When an order is placed, there are four possible results: small profit, small loss, big profit, and big loss.
A good trading system should eliminate the risk of big losses, make small profits and small losses frequently, make big profits occasionally, and never make big losses. Obviously, Martingale and most variants of Martingale cannot eliminate the risk of big losses. This is an issue that needs to be taken seriously and needs to be vigilant.
In addition, trend traders need to be alert to the following question: Why is it that the concept of trend tracking seems to be passed, but in practice the problem of "big profits cannot cover consecutive small losses" often occurs? How to solve this problem?
In fact, the trading industry requires an empty cup mentality, especially for veterans who are easily confined by their habitual thinking. Having an open mind will make it easier to get out of it.
Like and follow, welcome to chat with Brother Ming about various problems encountered in trading, or talk about the problems encountered when building a trading system. I wish you a smooth trading and a successful landing soon.
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