This circle is full of stories about sickles and leeks.
The big guys have money, resources, connections, and information gaps.
They easily occupied the top of the food chain through a variety of dazzling operations.
People are separated by circles, and a circle is a world.
The role that most ordinary people play is undoubtedly that of leeks.
The more vigorously the leeks grow, the more ruthlessly the sickles harvest them.
The end result is that most people will always be in a state of not being able to make ends meet.
Just like the donkey in the landlord's house, it keeps pulling the mill to survive.
Think about a question, can ordinary people avoid the fate of leeks?
Even a little sickle?
How many cuts does a green leek have to go through before it can truly grow?
I will combine my past experiences and my thoughts after reading (Self-cultivation of Leeks) to write a series of long articles to discuss this issue. I also hope that it can really help everyone!
Summary of the dry goods list:
In this "booklet" of only 35,000 words, Mr. Li clarifies his experiences and lessons, ways of thinking, and common investment misunderstandings along the way from an ordinary "leek" to a well-known investor, and summarizes the essence behind the chaos and presents it to everyone.
1. Definition of leek
The so-called "leeks" refer to the weak retail investors who do not make money or even lose money in the trading market.
"Leeks" seriously lack basic reading skills. They are the kind of people who never read the product manual when buying things, and they are the kind of people who ask others how to use whatever they get...
2. What are the typical manifestations of leeks?
1️⃣ “Leeks” start “buying, buying, buying” as soon as they enter the market
However, as soon as you buy, it starts to fall; as soon as you sell, it starts to rise.
Why does this happen?
Because, when even the aunties selling tea eggs on the street are discussing stocks, the "entry funds" of the stock market are on the verge of exhaustion... Think about it, when even you, who have nothing to do with the market at all, know about it and want to rush in to make money, then has the trading market reached its peak?
"Leeks" have another typical characteristic: they like adventure.
The scary thing about “leeks” is that they take risks regardless of the cost, and spend all their money as soon as they enter the market! They even spend all the borrowed money as soon as they enter the market!
“Leeks” mistakenly believe that the market is risky, so if you want to succeed, you have to take risks; if you don’t take risks, you can’t succeed…
The most direct way to gain experience is through your own practice. However, when it comes to risk, you must learn to observe other people's risk-taking practices as early as possible, rather than through your own practice.
If you want to escape the fate of being a leek, you must learn the following concept:
Never take risks if you can avoid them;
Even when you have to take risks, let the fools take them while you gain experience by observing from the sidelines.
Li Xiaolai said that if he had the opportunity to open a world-renowned business school, he would carve this sentence on the wall so that all students would remember it for life:
Watch other people taking risks!
2️⃣“Leeks” mistakenly believe that trading is a “zero-sum game”
They believe that the money they earn is the money lost by others, and the money they lose must be the same amount of money earned by others. When they lose money, they are full of resentment towards those who earn money - in fact, it is a resentment they bring upon themselves...
They completely ignore the biggest force in the trading market: the economic cycle, or the alternation of bull and bear markets. In a bull market, most people make money, and the money lost by a few people is not as much as the money earned by so many people; in a bear market, most people lose money, and the money lost by a large number of people is countless times the money earned by a few people.
So, this is not a "zero-sum game" at all. If you lose money, the correct explanation is: you bought at the wrong time.
3️⃣ “Leeks” are not lacking in patience, but in strength
The so-called "leeks being cut off the field" are not due to their lack of patience, but their lack of strength.
Two people are playing a coin tossing game, each betting 10,000 yuan. What determines the final winner?
It is obviously a 1:1 probability thing, how can there be a winner or loser! Yes, generally it is 1:1, but sometimes the coin comes up heads or tails many times in a row. If you only have tens of thousands of yuan and the other party has hundreds of thousands of yuan, then you will win or lose after a few losses. In other words, the person who gambles much more than the other party is more likely to win, right?
Therefore, in this kind of game, in the end, what determines the winner is not "luck" but "strength"!
In the trading market, what does strength mean? Long-term stable and low-cost cash flow.
At the same time, there is another important principle: control your position.
Always keep a certain percentage or at least a certain amount of cash - it's like needing an oxygen tank for diving, there's no room for negotiation.
4️⃣All “leeks” have hallucinations
Leek stares at the K-line chart every day, even every moment, and from time to time a thought flashes through his mind:
Oh! If only I had sold at the highest point and bought at the lowest point...
This is the most naive idea of wanting to get rid of the embarrassment of past mistakes. Old investors sometimes also have this illusion.
At the highest and lowest points, the trading volume is very small. As a member of the trading market, it is unlikely that you can sell at the highest point, and it is also difficult to buy at the lowest point...
3. How to escape the fate of leeks?
They enter the market because of ignorance, but precisely because they have experienced the consequences of ignorance, they try their best to transform themselves into knowledgeable people - this is the wise choice. Not only is it wise, it is also the choice of the strong, so that they can escape the fate of being "leeks".
1️⃣ Reduce transaction frequency
There is an obvious fact that is completely ignored by people: the higher the transaction frequency, the closer the transaction is to a "zero-sum game".
Therefore, if the leeks want to turn over, there is only one way to go:
Reduce the frequency of transactions... reduce, reduce, and reduce again.
The shorter the forecast, the closer it is to flipping a coin. As long as you trade frequently, you are still just a “leek”.
The result of frequent trading is that transaction fees accumulate, until they swallow up all your profits and principal.
2️⃣ Correctly improve the “return-risk ratio”
For people entering the trading market, there is only one thing that is truly scarce: reflection.
Therefore, if novices want to avoid the fate of being "leeks", they must reflect every day, reflect every moment, and reflect again after reflecting...
Pain + Reflection = Progress
Reward-Risk Ratio = Possible Reward ÷ Possible Risk
To improve the return-risk ratio, either increase the numerator or decrease the denominator.
(1) To reduce the denominator, feasible means include:
Adjust the stop loss line to reduce your risk
Reduce the proportion of each transaction amount in the total funds
Improve your ability to make money (or raise funds) off-site
(2) Possible means to increase the molecular size include:
Choose better trading targets
Choose the best trading time (for example, buy after several sharp declines)
Longer holding period (for example, through more than one bull and bear market)
Li Xiaolai made a choice within his ability:
(1) In order to reduce the denominator, I tried to find ways to continue to improve my ability to make money outside the market. I considered the money I made in the market as lost...
(2) In order to increase the numerator, I will not move after I buy, regardless of whether the price goes up or down, and will go through many bull and bear markets...
3️⃣Set a “stop loss line”
Some "leeks" heard that the experts not only have a "stop-loss line" but also a "stop-profit line", so they set themselves an "iron rule" that is completely impossible to enforce: Don't be too greedy!
The price fluctuations of Bitcoin are countless times more violent than the price fluctuations of the US dollar in the foreign exchange market. In the early days, Bitcoin fell 80% in one hour, or rose 500% in the same hour.
You can estimate the "daily volatility" of the trading target. If the daily volatility of X is 25%, then your stop loss line, or in other words, your "maximum tolerable loss" should be higher than 25%, such as 40%, because you are considering the risk, especially the risk in the trading market with volatile prices. Therefore, "preparing for the worst" is always more reliable than "blind optimism".
5️⃣Train your brain
Speculators refuse to learn, but investors are good at learning.
Before trading, do careful research and in-depth study; after trading, whether you win or lose, you must summarize and revise your concepts and thinking in order to improve your next decision and wait for the next right opportunity!
Thinking leads to decision-making, decision-making leads to action, and action changes destiny - this is the truth
4. Life is the most important
To repeat, the most important way for a novice to become a “non-leek” is to reduce the frequency of transactions.
A basic quality of a successful trader is to hold a certain percentage (or at least a certain amount) of cash at all times.
With basic thinking, all successful traders ultimately make the same choice:
In the trading market, it is absolutely impossible to go ALL-IN, whether it is cash, time or life.
Once you go ALL-IN, and spend all the money in your home, all the money you borrowed, and all the money you overdrafted on your credit card, you can only leave if you lose, and you will never have a chance to turn things around. It's too late to make up for the loss.
In the transaction process, one principle is very important:
Listen to the majority, consult the opinions of a few, and ultimately make your own decision.
The final transaction still requires an individual to make the decision alone. The further you go, the lonelier you will be. Loneliness is the most valuable quality of a successful trader.
Finally, you should have your own work and life besides trading. Life is more important, and you must work hard to live your life besides trading.
Because life is the essence of life.