Today I would like to share with you a comprehensive and rich method of mentality and money management. This method can be used in contracts and stocks, and is instructive for all kinds of products.
Mentality Management
First of all, try not to watch the market all the time. When the market fluctuates repeatedly, the price will fluctuate rapidly. Watching the market at this time will bring you great psychological pressure, and even make you close your position before the market reaches the stop loss or profit. But what we mean by not watching the market does not mean not watching the market. Just check it from time to time to confirm the pressure and support level. In general, don't let the fluctuations in the middle affect your judgment.
The second step is to set a stop loss. How can we find a good stop loss position? The correct ratio of a certain technical pattern in the historical market is very high, and then we can observe the range of the stop loss position in the past market to determine how much is more appropriate.
Finally, there is pending order trading. We can choose different types of commodities to trade. Holding three to five unrelated commodities at the same time and placing orders with different commodities will increase the possibility of reaching a deal.
Money Management
First, it is the combination of investment products. Sometimes it may take one to two weeks to wait for a good point for a single commodity, but investing in multiple products can reduce the waiting time and time cost. But be careful not to spread your investment too much, and it is better to control the number of holdings between 3 and 5. And do not hold products with similar attributes and historical trends.
Secondly, the proportion of investment funds. When doing contracts, you must use idle funds and make the worst-case plan. In other words, even if you lose money, it will not affect your original life, so that you can have a good mentality. So how much is the appropriate investment? It is best not to exceed 50% of the total funds. In the early stage, it is best not to invest all at once, and you can leave 25% as a supplement.
Finally, the loss ratio. Each loss on a single commodity should be controlled at 5% or less of the investment funds. Controlling losses can give you a better mentality to judge the market.
In fact, most successful people in contracts all have systematic trading: Undoubtedly, establishing a trading system is the most basic and most critical step. Having a complete and stable trading system can significantly reduce trading uncertainty and increase the success rate of operations. Under the guidance of the system framework, traders will be more calm and composed. However, the difficulty is that it takes a long time to establish such a system. The following is a general direction for establishing a trading system:
1. Focus on one product; (For example, some people only trade cotton, or only trade the Hang Seng Index contract)
2. The simpler the better. Simplicity is beautiful, stability and easy execution. (Simplicity is the best. Don’t make the system so simple that even ordinary people can’t understand it. If there are dozens of indicators added together, such a system needs to be PASSed.)
3. Develop the habit of reviewing after the market closes. (Reviewing the trading experience and insights of the day all need to be realized after the market closes.)
4. The entry and exit signals must be consistent.
5. Develop good habits of right-side trading.
6. Keep a steady mind and grasp the market trends.
7. Don’t trade with heavy positions. Even mature traders should trade with light positions. (The contract is about how long it can go, not how fast it can go.)
8. In a trending market, invest in the medium and long term; in a volatile market, invest in short-term investments.
9. Go long when the contract is above the major moving average, and go short when the contract is below the major moving average.
10. The relationship between open interest and futures price should be clear. If the futures price rises, you should go long. If the futures price falls, you should go short. If the futures price rises, you should be alert. If the futures price falls, you should be alert.
11. When going long, you should choose the strongest variety that is likely to rise, and when going short, you should choose the weakest variety.
Trading attitude
1. Determine the trend and follow it.
2. Entry point: seize the right opportunity to enter the market.
3. Amount of funds and good fund management.
4. Stop loss point (stop profit point) allows each profit and loss to be controlled.
5. Keep a calm mind. As long as you have funds, there are plenty of opportunities.
6. Pursue a stable and long-term profit model. The one that suits you is the best.
7. Do not pursue huge profits, but pursue long-term stable income and reliability, rather than profit maximization.
8. Pursue making money over the years, not overnight, and make money often, not big.
9. Reduce unnecessary transactions, and you are not far from success. (The more transactions you make, the greater the probability of stop loss.)
In summary, we have introduced mentality management and capital management respectively. For most traders, the above points are easy to see but difficult to do. Therefore, even if you have a good mentality and capital management methods, you must have strict execution.