Still looking at the K-line? It may have been useful in the last century, but it is actually useless now. Nowadays, sickles generally do not look at the K-line, but draw the K-line or follow the K-line.
Micro-level logic, for example:
Use order flow distribution to stop losses and rob money from leeks
Using information asymmetry to rob the money of the leeks
Using speed advantage to rob leeks of money
Using high-frequency data to predict the behavior of leeks and rob them of their money
Exploiting system loopholes to rob leeks (exchanges) of their money
Using impact costs to rob big money
etc.
Therefore, it is recommended not to delve into too much complex technical analysis. It is more useful to study fortune-telling and opening positions.
The hidden costs of micro-level transactions are huge, and few people can afford it. Brothers who pay attention to high-frequency event-driven should know the server costs. It is not recommended for ordinary people to play
The most powerful people actually have the opposite logic: they use a bunch of titles to cheat investors’ money, and then use high leverage to cut off profits and let losses run. If they lose money, they will double their positions until they are liquidated.
Those who understand should know who I am talking about. Before the liquidation, they made a lot of money that ordinary people cannot spend in the Milky Way era.
Let me add a few words to avoid being misunderstood: I actually agree with the idea of cutting losses and letting profits run. Starting from the Dutch tulip bubble, the effectiveness of trend tracking and momentum has been proven in the past 800 years. This was mentioned in Covel's best-selling book, but more rigorous empirical evidence was found in the book "Trend Tracking Strategies for Managed Futures - Finding Crisis Alpha" by Alex Greyserman and Kathryn Kaminski, students of Luo Wenquan and former employees of Minter Capital - when I saw that a certain CTA lost money for two consecutive years, I said: It's rubbish. My grandmother would be better than this. I just looked at the 1-minute line and opened a long position with 100 times leverage, and I became rich instantly.
If the same question is asked, "What is cutting losses and letting profits run?", the answers of a leeks and Larry Hite will definitely be very different. The real trend tracking is to look at the weekly, monthly, and annual lines, but leeks like to look at the 1-minute line, 5-minute line, and 15-minute line. The choice of this cycle determines the final success or failure.
In short, most of CTA's profits actually come from crisis alpha (short selling, profiting from black swan events) and value discovery (going long on low-priced products that deviate from value, the way Stanley Kroll and Fu Haitang play).
Crisis or value discovery is driven by macro fundamentals, and is positively strengthened in forward derivatives through the passage of time and the relocation effect of interest rates, thereby gradually amplifying the market's good volatility. Big trend trading can take advantage of the entire crisis or commodity value return process, and obtain huge profits through initial light positions + floating profit positions, while the risk of the initial position is quite small.
(Term explanation: Good Volatility: For CTA, good volatility can be good or bad. Good volatility refers to market volatility that is favorable for unilateral positions. Its characteristics are that after the trend leakage signal is generated and the CTA issues an opening signal, the market volatility gradually increases, and the price direction continues to accelerate in the same direction as the CTA's position. In short, it is a market that accelerates after a breakthrough)
CTA trend following, call options: crisis alpha, good volatility appetite, antifragility, market divergence risk taking
Speculative arbitrage trading, short option volatility multiple trading: negative crisis alpha, good volatility aversion, fragility, market convergence risk taking
Why can't leeks make money using this method? In the final analysis, it is because there is no trend in small cycles, so cutting losses and letting profits run does not exist in these cycle frameworks. The opponents of small-cycle games are the ones I mentioned above (maybe there are stronger ones, such as exchanges and rebate brokers who want to eat leek soup), and the noise caused by the superposition effect makes the market tend to be temporarily ineffective in this cycle. The fierceness of the game is unimaginable, so few leeks can come out alive.
True trend following may take three to five years to make money. If you ask David Harding what would happen if his flagship CTA lost money for three consecutive years, he would say that this is normal. Winton can collect $500 million in management fees, and I can still have beautiful cars and beautiful women and do whatever I want. If you ask the leeks what would happen if they lost money for three consecutive years, then they probably couldn't even afford to buy buns, so it's no wonder that the leeks do small cycles.
So I always think that the way out for ordinary people to work or start a business is much broader than trading. First, you need to accumulate the original capital that can afford to lose without affecting your life, then learn money management to try and make mistakes, and then decide whether you are suitable for trading. For example, if I lose money, it will not affect my life. After all, it is a small amount of money, and the profit is just a retracement, so I gamble.
