What is the core of compound interest in trading?
It is said that compound interest is the eighth wonder of the world. For example, it seems very simple to make money by speculating in cryptocurrencies. If you have a principal of 1 million yuan and double your income every year, this income is theoretically very simple. After all, in the cryptocurrency circle, people who do not have a return of dozens of times every year are always looked down upon.
1 million yuan, 2 million yuan, 4 million yuan, 8 million yuan, 16 million yuan... There will be 16 million yuan in four years.
But this is only a theoretical result of mathematics, and it is not easy to do in practice. So what interrupts your compound interest?
It is making a big mistake
Missing the opportunity is not a big mistake. If you make a mistake, it is not a big mistake as long as you stop the loss. Only when you carry a high leverage order and finally cut your losses, it is a big mistake. No matter how many times you have done it right before, as long as you make a big mistake once, the previous right will be 0, and the compound interest will be terminated.
This is why so many people have not made any money or even suffered a huge loss even if they have not missed the opportunity in the past few years.
In 10 big market trends, even if you miss out on 5 opportunities and make mistakes 2 times but stop loss, if you only catch 3 opportunities, you will still get 10 times or even dozens of times more returns. The reason why many people cannot do this is because they make big mistakes and cannot accumulate compound interest.
What's the use of doubling your profits this time, but then losing half of them when the market crashes?
In the eyes of many users, the big V group seems to be always very bad, either missing out on opportunities or making mistakes and being laughed at every time, but the core skills of many big Vs are to prevent themselves from making big mistakes. It doesn't matter if you miss out on opportunities or make the wrong stop loss, but as long as you don't make big mistakes, compound interest can continue, and you will make a lot of money sooner or later.
For example, Buffett's annual returns are not very high, although he also makes wrong decisions and buys the wrong company, buys IBM and sells airline stocks by mistake, these are small mistakes, never making big mistakes has allowed him to compound interest for decades in the investment market and become the world's richest man. Those fund managers who laughed at him for a while don't know how high the grass on their graves is.
