When we use magnifying glasses or reading glasses to look at maps or text, we feel strangely dizzy, especially when the magnification is ten or twenty times. This feeling is very similar to that of a trader engaged in virtual futures trading.
It feels like the things around you have suddenly magnified tenfold, from depth of field, eye distance to imaging, the visual nerves and brain thinking are suddenly confused and at a loss. Most traders are in a dizzy state of half drunk and half awake in the futures market.
The surviving masters in the trading field have summarized several trading rules and listed them here. I hope that investors can increase their profits and avoid pain.
Whether you are a beginner or an experienced trader, you often overlook the psychological element of successful trading. Trading is undoubtedly one of the most stressful jobs in the world, almost like fire eating or defusing a bomb.
Trading performance is sometimes like a roller coaster, sometimes climbing high, sometimes plummeting, always mixed with joy and sorrow. If you are not careful, the market may destroy the investor's psychology and ravage the investor's soul. As long as you enter the market, such experiences are inevitable, but investors can learn how to deal with these situations and even learn to profit from them.
1. Rely only on yourself. When trading, never rely on others to achieve success. The person an investor wants to rely on may not be a successful trader at all. Of course there are exceptions, but the chances are rare. Only by believing in yourself can you do better.
It is extremely important to never blame others for your failures. No matter how low you fall, you must take full responsibility for your decisions. Only by taking responsibility can you correct your mistakes and not repeat them.
2. Focus on long-term goals. Avoid adjusting trading methods based on short-term performance. Because in the short term, any trading method may be brilliant for a while, but the long-term cumulative results may be terrible.
On the other hand, even the best trading methods are bound to suffer losses from time to time. Therefore, if you judge the quality of a trading method based on short-term performance, you may exclude the best trading method, which will lead to losses.
3. Don’t be self-centered. Being self-centered is the fatal flaw of top traders. This kind of example is not uncommon. Don’t become a victim of it. Self-centered traders cannot face losses.
They can hardly stand a few consecutive losses. This leads them to often evaluate the quality of their trading methods based on very short-term performance. If the market does not immediately follow their trading trend, they will rush out, which is a big taboo in investment.
4. Trade within your ability. Trading should not affect your normal life. If investors are always nervous regardless of whether they make a profit or a loss, they should never enter the market, because temporary emotions can easily lead to disastrous strategies and erroneous judgments. One of the most serious mistakes investors make is to increase their investment after making a profit.
This is the worst thing, because after the joy, there is often a loss. If you increase the stakes before the loss, the loss will be twice as fast as the profit. The transaction amount should be kept constant. After all, the slow and steady ones will be the ultimate winners.
5. Don't be emotional whether you make a profit or a loss. Trading is like playing golf. Every golfer has his own strengths and weaknesses, and his performance varies from time to time. When he has a good performance, he feels like Tiger Woods, thinking that he has found the trick to playing golf and will not hit the sand trap or pond again. Unfortunately, the next time he finds himself in the sand trap, he shouts that he will never play golf again.
In fact, trading psychology is the key to making profits in these markets. Only those investors who accurately understand these rules, as well as the psychology of the market and investors, especially their own psychology, can have a better chance of making profits while remaining rational.
The core elements of successful trading are: following the trend, stop loss, rules, and execution
To obtain steady and continuous profits from the capital market, the core elements required are: following the trend, stop loss, rules, and execution.
1. Follow the trend. If you don’t follow the trend, your operations will encounter many stop losses. To follow the trend, traders must have their own judgment on the trend. “Following the trend” must solve three problems:
(1) Fix your trend judgment cycle. Any trend judgment must be based on a certain trading cycle. Some look at the daily chart, some look at the weekly chart. At different cycle levels, the trend judgments obtained are different, and sometimes even contradictory. There is no one who obeys whom, and there is no right or wrong. The key is: traders must clearly define the trend judgment cycle that suits their personality, and cannot be long or short.
(2) Determine your trend judgment method. This judgment method must be relatively clear and not complicated. Trading is an art rather than a science, so there is no "perfect and precise" method, but we must have a method to constrain and refer to. I personally use moving averages, trend lines, and large-scale pattern breakthroughs as the main basis for judging trends.
The three basic concepts of trend need to be emphasized, that is: the brewing of a new trend takes time and cannot be reversed by a long positive or negative line in one day; once established, it will continue for a period of time; the advancement of the trend is tortuous, not a straight line. The trend judgment method based on these three concepts often fails in the face of V-shaped reversals. Because the advancement of the trend is tortuous, we should be tolerant and accepting of normal callbacks or rebounds during the trend interpretation.
(3) According to different trend states, clarify your response strategy and "follow" the trend in operation. Trends include: trend market (long or short), consolidation market. The main strategy is: focus on trend market and avoid consolidation market. For the decline, you must be absolutely and unconditionally short.
As for future operations, I am increasingly inclined to establish long (short) positions at historical bottoms (tops) as much as possible, and then hold them patiently until the trend reverses, which is a long-term trading mindset.
2. Stop loss. For professional investors, stop loss is an important part of a series of trading procedures. It is not emotional at all. Although it is a heroic act, it is very natural. If you are not good at stop loss, a big loss is enough to lose the profits of the previous 99 times. Therefore, strictly implementing stop loss is the only way to survive in the capital market for a long time.
Stop loss is scientific and cannot be done arbitrarily. It is also necessary to reduce "unnecessary" stop loss operations as much as possible. After all, stop loss will lead to direct capital loss. It should be emphasized that stop loss is by no means the goal. The ultimate goal of trading is: no need for stop loss.
3. Rules. When traders enter the capital market, they cannot suppress the urge to trade. One reason is that traders have too much control over their accounts and trading is too easy, and can be done with just a click of the mouse.
Think about real-life transactions or business dealings, which are subject to many external factors and you will think twice, but transactions in the capital market can be completed in a flash.
The emotional characteristics of human nature are the root cause of many people's trading failures. Only by formulating rules and establishing a restrained trading mechanism can we reduce the risk of losses caused by frequent or emotional trading.
Rules are also commonly referred to as trading systems. A complete trading system should clearly stipulate the following:
(1) Entry conditions and position ratio: For traders who are eager for huge profits, they need to restrain themselves through position control. The desire for huge profits will distort trading behavior because they may trade with heavy positions and bet everything on one investment.
(2) Stop loss conditions: If the judgment is wrong, stop loss must be made. What is the basis for stop loss? When should stop loss be made?
(3) Exit conditions: that is, when to stop profit. Traders can have several trading systems to deal with different market situations. But there is a prerequisite: the trading system must be verified by the market for a long time, have a probabilistic advantage, and the trader must have sufficient confidence in the system.
I now have my own trading system and strategy, quasi-systematic trading that integrates market experience, and swing trading based on daily trends. I have to abandon the idea of prediction. I just need to follow the rules. If the market trend meets my conditions, I will enter or hold, otherwise I will wait and see or stop loss. There is no need to subjectively predict how the market may go.
Fourth, execution. Rules must be strictly enforced, otherwise they are just empty talk. Strictly enforcing the rules you set and being completely self-disciplined is a difficult part. Execution is difficult because humans are a combination of rationality and irrationality. The irrational side always consciously or unconsciously attempts to destroy our rational thinking.
We must overcome this barrier and be strict with ourselves, otherwise, we will never be able to join the ranks of successful people. This process involves self-cultivation, which requires time accumulation and constant self-psychological strengthening.
The first of the 12 Wall Street Family Rules is stop loss. I used to think so. But now, I think the first rule should give way to following the trend. If you don't follow the trend, then your operation will inevitably encounter many stop losses. Therefore, following the trend is the most important element of the four elements of trading.
Go with the flow, these four simple words, every trader knows them, and can even explain them in detail. But how many people really understand them? Judging from the reality that most people lose money, very few people really understand them.
Thank you for reading to the end. In the trading market, few people can continuously practice internal skills, that is, the relative theoretical foundation. Come on, traders!