Recently, I saw a topic: Is the biggest enemy in trading oneself or the market? My instinctive response is myself. I cannot deny that some people make money by luck; money comes like the wind.
However, my thoughts are relatively conservative and stable. I personally believe that learning not only fills my brain with knowledge but also allows me to use what I have learned to acquire more wealth.
Many people are unable to take profits and end up getting liquidated by the market. In the field of financial investment, contract trading attracts the attention of many investors with its high leverage and high potential returns. However, the harsh reality is that most people who engage in it find it difficult to achieve ideal results, and even suffer severe losses. The reasons for this are multiple key factors that determine it is not a good choice for the general public.
The psychological burden of investment is hard to bear: The leverage feature inherent in contract trading is a sharp double-edged sword. While it amplifies profits, it also multiplies the pressure of losses. Most people, facing rapidly changing market conditions, cannot control their inner greed, fantasizing about continuous windfall profits at the slightest gain, and are reluctant to take profits; when faced with losses, fear and luck intertwine, making them unwilling to cut losses and exit, hoping for an instant price reversal, ultimately turning small losses into huge ones. This back-and-forth tug-of-war between greed and fear makes it difficult for investors to rationally execute trading strategies, with emotions running wild and frequently undermining carefully planned setups.
Weak capital foundation is prone to collapse: The high-risk characteristics of contract trading mean that the principal can significantly shrink at any time. Unlike stocks and other assets, a single directional misjudgment coupled with leverage can lead to a loss of half or more of the principal, which is not uncommon. Ordinary investors already have limited capital reserves and find it difficult to withstand such high-intensity shocks. Family savings and years of accumulated savings put into contracts can vanish after a few rounds of losses, turning future life plans and financial stability into illusions, with the financial foundation collapsing instantly, leaving no room for recovery.
Shallow knowledge limits understanding: Successfully navigating contracts requires a deep foundation in financial knowledge, covering multiple fields such as macroeconomics, asset pricing models, and technical analysis theories. However, most participants have not studied systematically, only having a superficial understanding of complex derivatives, unable to comprehend contract details, and unclear on leverage calculation mechanisms, misreading market signals. Without understanding the time value erosion of options contracts, blindly holding positions until expiration, they may be unaware when value drops to zero. Exploring blindly in the market due to a lack of knowledge inevitably leads to losses.
Lack of practical experience leads to failure: Experience accumulation is crucial on the contract battlefield. Newbies, having not undergone multiple rounds of bull and bear markets, have no perception of market rhythm, cannot distinguish between consolidation and trends, and trade frequently amidst volatility, leading to accumulating transaction fees and quietly losing their principal. Lacking the ability to respond to sudden black swan events, such as policy changes or geopolitical crises that cause market crashes, newbies can only stand by helplessly, watching their accounts get liquidated, while seasoned traders can use past lessons to lay out risk-hedging strategies in advance.
Market trends are difficult to predict and highly variable: Financial market trends resemble a mysterious giant beast, with their trajectory influenced by countless factors intertwined, including global politics, economics, and nature, making precise predictions difficult. Contract trading heavily relies on short-term trends, which can often reverse suddenly, with bullish trends turning bearish in an instant. Most people lack a macro perspective and the ability to capture information quickly; they might go long based on outdated news, only to be forced to cut losses due to new developments, getting lost in the unpredictable market and becoming victims of trends.
Contract trading is by no means a smooth path to wealth; it demands a high level of investment psychology, capital depth, knowledge reserves, experiential accumulation, and trend control. Ordinary investors, if they rashly step in, are likely to fall into a quagmire of losses. Only those who dedicate themselves to learning, cultivate their mindset, accumulate experience, and have ample funds without worries can, after a long period of honing, find a glimmer of hope in the world of contracts; otherwise, keeping a distance from contracts is the wise way to protect wealth.
This article is the result of my logical thinking and direction through chatgpt, with AI helping me refine the content. Any similarities are purely coincidental. I believe it can provide help to many new friends, organized into an article for their reference.