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Too many people have studied trading for many years but still fail to achieve ideal results. Many times, they fail due to the problem of trading level and cycle.
There is a line in Dream of the Red Chamber: "Even if there are three thousand rivers, I only take a ladle to drink." It means that when there are many rivers and lakes, I only take a ladle to drink. It reminds future generations that they may encounter many beautiful things in their lives, but it is enough to grasp some of them carefully.
The same is true for our trading. I have talked about the issue of trading levels too many times in class. It can be understood but not expressed in words. Once you understand it, it is actually very simple, but it is not easy to explain it to others.
Until I came across these pictures, Beijing is a city with four distinct seasons. Take 2023 as an example, the average temperature in Beijing in winter at night is -2.5°C
This is a normal temperature for winter, but on one day in January 2023, the highest temperature in Beijing reached 14°, and the lowest temperature on another day reached minus 16.7°C.
Suppose there is a construction worker named Zhang San in Beijing. His working hours are from 1am to 9am. Because he works outdoors, he has to keep warm when moving bricks in January. He has to wrap himself up like a dumpling in three layers of clothing. After all, minus 16.7°C is no joke. But if his co-worker Li Si works from 7am to 5pm, then maybe just a cotton jacket is enough.
So the question is, is there no standard answer to who is more vulnerable between Zhang San and Li Si? So many times, many things are not black and white, and we cannot talk about right and wrong without considering the background.
If we regard a year in Beijing as a large cycle, a month, a week, and a day can be regarded as smaller cycles. The mainstream trend of the large cycle may be very obvious, for example, spring usually comes after winter, and autumn comes after summer. However, in smaller cycles, counter-seasonal phenomena may occur in a month or a week. For example, sometimes it will suddenly snow in summer and it will be sunny in winter. This is like the trend of different cycles in the trading market. The dominant trend of the large cycle is obvious, but different trends may appear in the small cycle.
What we need to do is to determine the cycle that suits us, clearly position each of our transactions, enter the market when the sun just rises, and exit the market when the storm comes, without greed, attachment or fear. This is Ruoshui 3000, and I only take one cigarette.
Now that the theory is clear, how do we put it into practice in trading? Let’s first think about three questions: What is a trading cycle? How do I choose this cycle? Which one should I follow?
Let’s first talk about what is a trading cycle?
For any market recommendation chart, we divide it into different levels according to time based on high opening and low closing in order to observe and study the performance of the market in different time periods. Or cycles, such as daily charts, 4-hour charts, 1-minute charts, etc. Based on our discussion of the four seasons above, we know that different time levels will have different market performances.
For example, on the daily chart, we can see a clear bullish trend.
But when we open the 4-hour chart, we see another period of oscillation.
When we open the 1-hour chart, we see another bearish trend.
If I ask you right away, should I go long or short on Sugar Orange now? How would you answer? Do you feel like cursing? You don't tell me which cycle you want to focus on, and you don't tell me the background of the matter, so how can I know whether to go short or how much to do?
The same is true for our trading. I have talked about the issue of trading levels too many times in class. It can be understood but not expressed in words. Once you understand it, it is actually very simple, but it is not easy to explain it to others.
It is very important to find a trading cycle that suits you.
So how do you choose the cycle that suits you? It's very simple. Just ask yourself a question: How often do I check the market?
Too many people have studied trading for many years but still fail to achieve ideal results. Many times, they fail due to the problem of trading level and cycle.
For example, if you are a firm day trader and never allow yourself to spend the night in the cafeteria, then the 5-minute chart is very suitable for this kind of play.
If you are willing to accept a larger retracement and a longer holding period in order to gain greater profits, then the 1-hour or 4-hour spread is very suitable for you.
Then comes the third question.
We know from the market that the market has inertia. Once a trend is formed, it will not reverse easily. Therefore, in order to improve our trading success rate, we generally choose something that is longer than our own trading cycle to follow. This can not only improve our winning rate of this transaction, but also ensure that we can get as much profit as possible. This is the so-called trend cycle.
The trend cycle and trading cycle generally follow the four-fold principle. For example, if the trading cycle is 5 minutes, then this cycle is 20 minutes. If the trading cycle is the Daily chart, then the trend cycle is the Weekly chart.
For example, construction worker Zhang has to move bricks for four or five hours before he can take a break and check the market, so his cycle is the 4-hour chart, and its daily cycle is the Daily chart.
Assuming we use the example of the rock sugar layer above to illustrate, according to our principle of the three-step entry of two-find and three-confirm, Zhang San should first look at the trend cycle. The Daily chart tells Zhang San that the current trend is a bullish trend. Moreover, this bullish trend has not reached its end. The bullish trend that Zhang San sees in the Daily chart is the trend cycle he wants to follow. The conclusion given to him is that he can go long and do it boldly.
Then Zhang San’s second step comes to his trading cycle 4-hour chart. The 4-hour chart currently tells him that it is a volatile trading range. According to the conclusion Zhang San just got in the first step, he can only go long at present, and the current level of trading range is essentially a complex callback of a larger cycle.
According to the principle of following the big and going against the small, Zhang San can only look for opportunities to go long at the support level of his trading cycle, so as to determine his specific strategy of entry position, stop loss position, take profit position, order management rules, etc. So Zhang San's specific strategy is shown in the figure.
Then in the following holding process, Zhang San may encounter several common situations:
Case 1: The market goes smoothly as expected. However, in the development of the market, in smaller cycles, there have been many opportunities that meet his trading system. Should he make a few more trades? The answer is no.
There are thousands of rivers, but I only drink from one. We can understand many trading opportunities, but we don’t have to seize them all. Only by giving up can we gain. Otherwise, the common situation is that we will be like a monkey trying to break a stick, and get nothing. It will also disrupt our original trading plan with a high winning rate, resulting in losses.
In the second situation, the market goes smoothly as expected and breaks through T1T2 strongly, resulting in the failure to reap the profits after T2. This is the so-called Mai Fei’s answer: this is normal. Your goal is to make 1,000 yuan, but now the market has given you 1,500 yuan instead. I often regard the extra 500 yuan as a pleasant surprise, a big red envelope given to me by the market.
Many times, if you think from a different perspective, your sense of happiness will be greatly improved. Don't expect to drain all the water in the river through cross-regional transactions, not to mention that I have just told you in the strategy. T2 is not a fixed stop-profit position, but a floating price that relies on moving stop-profit.
How to move the take profit, I have talked about it many times in my previous system class, so I will not repeat it. The more important thing is, do you remember it? Because we are following the rise of the Daily chart, it is not the end, so the market has given us the expectation of seeing further and getting further, I will be grateful instead of complaining.
Case three, the market did not go as Zhang San expected, so he stopped loss and exited the market. This is also normal, and this is the norm in our daily trading. Just accept it, forget about this losing trade, re-analyze and prepare for the next trade, or change the product, or change the market, or even turn off the computer and try again another day.
Many times, the stop loss is not necessarily the fault of us traders, but the fault of the strategy itself, because the essence of our business is gambling, gambling on future expectations.
Technical analysis is not science, it is based on probability in the context of big data, everything is art. Everything is vague, correct
Back to the beginning, why do many people, after studying trading for many years, still fail on the issue of trading levels and cycles?
The core problem is like a monkey trying to break a stick, wanting everything but often ending up with nothing.
If you want to make quick money in the trading market, and make money immediately by going long, then isn’t it essentially thinking of a smaller trading cycle and making money by going long? It may be a 5-minute chart or a 1-minute chart. So is the 5-minute chart suitable for your trading cycle? Is the 5-minute chart a trading cycle you are good at? The thinking cycle of the 5-minute chart is the 20-minute chart. Is it rising at the moment? Is it a trend at the moment? Has this trend reached its end?
You see you don't know anything.
In short, your demands are not in line with the current market. If you use these incompatible demands to invest in an unsuitable market, if you don’t fall, who will? If you don’t lose money, who will? If you don’t want to cry but have no tears, who will? Learn.
Regardless of whether you can make money, at least you can lose less.
Finally, I will give you a fateful question. You are welcome to interact in the comment section. I am Cong Ge, who is good at making complex problems simpler.
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