The ability to correctly grasp market fluctuations and create long-term wealth is not a matter of talent; at its core, it is an essential ability needed to work in the speculation field.
Making one or two successful trades does not mean you have a successful career; anyone can do this at any time. This is not an industry where you get rich by luck. The goal of speculation is to continuously do the right things, not to take shortcuts, not to feel discouraged by recent losses, and not to get arrogant after winning two trades in a row. My interest in the art of trading far exceeds my interest in the last one or two trades. Everyone can drive a nail or two into the board, but this does not mean they can build a house. To build a good house, you need not only skills and planning but also the confidence to execute the plan and the ability to work every day regardless of the weather.
What is speculation
Speculation is an art of identifying possible future trends. It is difficult to accurately predict or foresee what will happen in the future or how it will happen. However, all investment predictions involve three elements: the choice of prediction, timing, and management. Mastering only one of these is not enough; you must thoroughly understand and be familiar with all three elements. Therefore, let's study these elements one by one. The choice has two aspects: one is to choose the market that is about to start fluctuating; the other is to choose the market you can focus on. Don't expect your favorite market to rise significantly just because you're trading in a certain market, thinking it will fill your pockets. By studying the charts of stocks or commodity futures, you can discover an astonishing secret that sets you and potential speculators apart. This secret tells us that the pattern of prices fluctuating within a certain range usually leans towards one side, thus vaguely presenting some trend. There are only 3 or 4 opportunities in a year where prices change significantly in an instant, and you can take advantage of these opportunities for profit. If you try to look at the charts, you will see and understand that significant price changes do not occur every day. In fact, the likelihood of significant price changes happening is greater than the likelihood of them occurring… Big changes are exceptions, not the norm.
This is why choice is important. Would you rather sink into a capricious and directionless quagmire? It will exhaust you or completely take you out. Regardless of the situation, you lose, either by losing money or losing time. Therefore, it is essential to understand when the conditions for a price surge are ripe.
Considerations regarding market conditions include trading days per month, trading days per week, holidays, and internal market correlations, etc. Additionally, there are factors like the net long or short positions of the largest (and smartest) traders, mistakes that the general investing public cannot avoid, and significant news that can impact the market. Successful speculators know how to wait patiently, while the average person cannot resist; they prefer to jump in and gamble as quickly as possible. Meanwhile, speculating experts will wait patiently because they know that only when the key finds the right lock will it work, and only then will there be profits.
The reason why choice is so important for profit is that when I trade in only one or two markets, I am always able to achieve the best performance. By excluding all other markets that can be distracting, I can focus on the operation of the markets I have chosen, what factors influence them, or more importantly, which factors do not affect them. If you do not invest skills, passion, and action into your career, you will not achieve significant accomplishments, and this is no exception in this field. The more you focus on your work, the more success you will achieve.
This concept closely aligns with the state of this industry. Enthusiastic experts can earn more money than the average participants. In today's complex situation, specialization can yield great rewards. Years ago, I heard about a smart person who made several million dollars in the cryptocurrency space. He lived in the mountains of Northern California and only called his broker about three times a year, only buying or selling the same coin. His broker told me that this person really relied solely on this one coin, using a concentrated investment strategy to earn a significant sum.
Choosing the right timing
If you focus on a specific commodity future, and your new tools, techniques, and dreams tell you that a worthwhile fluctuation is about to occur, it does not mean it's time to rush in. Choosing is about identifying things that are about to change; timing, on the other hand, is the second element of speculation, involving when real changes will occur. Choosing the right timing is about narrowing it down to more precise points when the price just starts to change. At this point, simple trend lines, price breakout tools, and patterns can be used. The importance of choosing timing lies in letting the market prove itself and preparing for explosive movements in the direction you have chosen. What does this mean? In the case of planning to go long, I can say: "A price drop does not necessarily indicate an impending explosive upward movement." Quite the opposite, a price decline may lead to another wave of downward trends. This is the simple principle behind Newton's law of inertia. Traders are always in conflict; we want to buy, and according to traditional logic, we should buy at the lowest price possible, but trend experts say not to buy things that are falling! My advice is: do not buy at the cheapest price; wait until the explosive trend starts before buying. Even in this case, you may not get the lowest price, but it is much better than being trapped by a new low price.
Control trading
The third level of speculation relates to how you manage trades and the capital you invest. Traditional theory tells us not to engage in trades you cannot afford. Perhaps. But think about it: if your mindset is that these are toy stocks, I guarantee you will play with them and may lose. If these are real money, meaning money you cannot afford to lose, you may be more cautious, and the opportunity to profit is the same. Demand is not only the mother of invention but also the mother of speculation management. Trade management is more important than financial management because it relates to how long you want to stay in the trading arena and how much you want to earn. It is closely related to your emotions, meaning you should not let success go to your head, overtrade, or trade too little; it represents doing the right thing during trading and controlling your emotions. Knowing how to trade does not equal knowing how to win. The art of trading combines choice, entry techniques, and money management, all of which are essential principles to achieve. However, super traders know better that only through management, that is, by controlling or utilizing these techniques, can you maximize your profits.
Focus on trend rather than price vs. focus on price rather than trend
-Some traders are too concerned with price levels during contract transactions. They insist on lowering the price by several levels when buying and always want to sell at a higher price when selling. This approach often leads to missing out on good opportunities for the sake of small gains.
The highs and lows of prices are relative. What seems cheap now may actually be expensive if the next trend goes down; conversely, if the next trend goes up, even if it was a few price levels high at the time, it could be seen as extremely cheap in hindsight. The success or failure of a contract does not depend on now but on the future. The current price is merely a starting point, while the future trend is what truly matters. For traders who focus more on trends than prices, once they see a sign of a trend, they won't worry about a few price levels. In contrast, traders who focus more on price than trends see only these few price levels, with no awareness of the trend at all.
The danger of being too concerned with price levels is that it can lead to drifting further away in the opposite direction. Because during an upward trend, if you insist on waiting for a cheaper price to buy, you will only have the opportunity when the trend declines. If this decline indicates a trend reversal, then the bargain you bought becomes a bad thing. Similarly, during a downward trend, insisting on waiting for a high price to sell means you will only have the opportunity when the trend rebounds. If this rebound indicates a market reversal, selling at a high price will also result in losses.
Not being overly concerned with price levels does not mean encouraging blind market chasing. Blind market chasing refers to worrying about not being able to buy or sell during strong upward or downward trends and thus chasing prices at market values, which often results in buying at outrageous highs or selling at outrageous lows. When the market fluctuates slightly, it is easy to be frightened and cut losses. Note: Not being overly concerned with price levels means not caring about individual price gains or losses when a trend has just been confirmed; the two concepts should not be confused.
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