Some people think that to do well in trading, you must learn more techniques. Many traders spend a lot of time studying all the technical theories in the market. But unfortunately, even if you understand all the techniques, it doesn’t mean you can trade well. The fact is that those who understand a lot of techniques and seek secret methods have ultimately not been able to break through in this market.
Then many people will start to doubt what is really the most important in the world of trading. Having technology does not necessarily lead to profits, so we often say that technology is not everything in trading, or that the importance of technology in trading does not even account for half of it. The fact is, I see those who profit in this market, those who consistently make money, are using some very poor techniques that others look down on.
It's like how people often discuss technical details with me. For example, I often get asked how I actually trade. I always say trend following, and then they will ask how to follow the trend. I reply that I do breakout trading. In fact, this is the whole secret of my trading. Of course, I understand that most people in our circle use the same concepts and ideas. If we trade the same asset and it happens to form a trend, our entry points will be very similar. This means that trend-following traders are all using the same philosophy. Perhaps the methods are different, but they are all riding the same wave of market movement.
What I want to say here is that technical aspects are extremely simple, and this is absolutely true. However, for ordinary people, you must accept this simplicity. Accepting simplicity is inherently a challenging task because until your first few years of trading, when you incur losses and see others making money in the market, you will still doubt whether they are using methods you don't know. But I want to tell you two points: to achieve profitability in trading, you must follow the trend. The only way to follow the trend is to establish a breakthrough trading mechanism that you recognize and can execute. No breakthrough, no trend.
Does knowing this mean you can make money? Don't be so naive, okay? But there is always a direction that is correct. Many people keep switching methods. I say many methods are very similar, but some different methods actually reflect different philosophies. For example, why is it better to do breakouts rather than pullbacks? I have elaborated on this from the perspective of liquidity and trading logic in my previous VIP live broadcasts. This can form a logical closed loop. Why is it good? Why is it not? Why do it this way? You must have a reason that can convince yourself; otherwise, execution will become exceptionally difficult.
After talking for so long, what is the fundamental reason that hinders you from trading correctly? Is it emotions? Is it the emotions that lead you to make some wrong decisions? I don't know if everyone has had this experience: you just suffered a few losses, but after adjusting yourself, your mindset has recovered quite well. You are determined to stay steady and trade according to the system. However, something unexpected and uncontrollable always happens next. Your actions are fine, but continuous losses throw your mindset off balance. You decide not to execute stop losses anymore, and perhaps this single decision will turn a small loss position into a big loss, eventually spiraling out of control.
It’s not just you; many trading experts also lose their hard-earned positions due to such issues. This is the impact of emotions on trading. You think it's a technical issue, but it's actually your mindset issue. The emotional problems caused by fear can drive all your intelligence out of your mind.
For many people, the biggest issue you face is not greed. In fact, as long as greed occurs within a baseline, it is acceptable in trading. However, fear can lead to major mistakes.
After continuous losses, the fear of loss will make you abandon the principle of stop losses. After continuous profits, or even after a small profit, the fear of profit may lead you to exit early and miss out on a large wave of trend profits. Similarly, when you cannot correctly understand the risks and losses in trading, fear will prevent you from opening positions or trading.
These issues are caused by emotional instability. Therefore, in this market, most traders have technical skills, but only a very few can maintain emotional stability in dealing with the market and their trades.
Unfortunately, fear is an inherent emotion because in trading, you will definitely face some breakthrough situations. You must understand what you are going to confront. For example, abandoning stop losses after continuous losses can lead to disaster. You may not understand this initially, but after suffering losses, you get it. You must treat it as a bottom line that you cannot touch again. Once you have this low point, your emotional threshold will rise higher and higher, and you will not let normal losses affect your mindset.
At the beginning, traders have a very low emotional threshold. A small loss can make people very anxious, and a small profit can excite them. However, as trading time increases, before mastering trading skills, you will find that your disadvantages in the market become more and more apparent. As time extends, the probability of making money through your abilities will decrease while the probability of making money through luck will increase. At this point, you will discover a harsh reality: with your current ability and understanding, you cannot profit in the market. Many people then fall into a dual blind spot of emotions and cognition, lacking good trading strategies and a healthy emotional control mechanism. Most people will be cleared out of the market at this time.
At this point, you need to establish a correct trading feedback. One very important task, or habit, that you must carry throughout your trading career is that you must use smaller risks to test the market. Only then can you better manage your emotions. When you are impulsive in the market and about to violate your principles, it is emotions that are trading, not you.
Once a person loses control of their emotions, they will basically lose all rationality. Therefore, the only thing we can do is not to start controlling ourselves after discovering we are out of control but to do everything possible beforehand to prevent the occurrence of losing control. The only way to do this is to engage in trading with a smaller, more reasonable, and completely acceptable risk. Only then can you have a mindset suitable for trading.
Most of the time, our mindset is not suitable for trading. Especially the decisions made because of losses or profits from the last trade are often wrong and can be extremely misguided. Although each of our trades constitutes our complete trading data, each trade should actually be independent. They have the same logic and principles, but do not influence each other. If this is truly the case, then this is a mindset suitable for trading.
So the biggest secret in trading is not technical, nor is it related to any strategies or systems. Rather, you should learn to control your emotions. The quality of your emotions should not be judged by whether you are making a profit, but by whether you are making mistakes. This is the standard for right and wrong: having a good logic, an executable standard, and a replicable strategy, then executing it correctly. This is the right action, and within this scope, you will not lose control. This is the most important.
