Why do even skilled people get liquidated?
The master said: Your preferences are your death traps.
After a long period of training, every trader has more or less formed their own trading system. However, once this system is established, its weaknesses also emerge simultaneously. Therefore, there is a saying in the trading circle: those who trade trends mostly die in consolidation, those who trade consolidations mostly die in trends, those who trade short-term mostly die in sudden surges, those who rely on subjectivity mostly die in feelings, and those who rely on news mostly die in headlines...
(Turtle Trading Rules) This phenomenon is called the trader effect: when too many people use a certain method, since the market is about a few people making money from the majority, the market will change, causing the profit effect of that method to decrease. Similarly, after the profit effect of that method decreases, the number of users will decrease, thus the profit effect of that method will improve again. This cycle repeats.
Therefore, we can see many traders constantly learning new methods and new ideas. They switch from one to another and have read hundreds of trading books, yet their accounts sometimes show profits and sometimes losses.
The solution to this problem is: either trade medium to long-term, or filter out unsuitable market conditions.
The reason for trading medium to long-term is: the patterns of the market are prone to change in the short term, but the long-term, essential patterns remain unchanged for hundreds of years. Livermore discovered this pattern, so he said: Speculation is as ancient as mountains; there is nothing new on Wall Street. If a trader frequently looks at weekly or monthly charts, they will slowly discover some unchanging patterns.
Another approach is to filter out unsuitable market conditions: for example, my strategy is suitable for markets with clear trends, so I only trade during strong short-term movements, preferably when multiple varieties resonate in the upward or downward direction.
Operation. Similarly, this mindset also requires traders to be very patient.
Therefore, regardless of which path you take, patience is the most important. After understanding the above principles, there remains the most difficult hurdle: the human nature hurdle! Livermore said: "Whenever investors or speculators have a period of smooth sailing, the stock market will always exert a temptation that causes them to become either complacent or overly ambitious. In such cases, only sound common sense and a clear mind can preserve the fruits of victory already gained." Recently, a friend of mine continuously made profits playing cards on his phone, but then lost it all back. When he told me about the whole process, I felt it was very similar to how a stock trader becomes overconfident after making continuous profits and ignores risks. Being able to maintain a consistent mindset is indeed a challenging task. We see that at the end of a bull market, most retail investors firmly believe that buying on every dip will yield great profits, only to get stuck at the peak during the last dip.
This hurdle cannot be overcome just by perfecting techniques. Livermore's method is to take out the usual profits after a significant gain and save them. If you continue to operate, it's easy to lose everything immediately. My method is to go travel, binge-watch shows, or work crazily to distract myself after making a large profit, and consider the next trade only when my mindset is calm. This is also an experience gained after losing a lot of money.
From the above analysis, you'll find that neither the high requirement for patience nor the high self-discipline regarding human nature is something an average person can achieve. This leads to the fact that no matter how skilled or mature a trader is, as long as they haven't left the market, the risk of liquidation always exists. Livermore said: You might ask: "With such rich experience, why do you still allow yourself to do such foolish things?" The answer is simple: I am human, and I have human weaknesses. Like all speculators, I sometimes let impatience cloud my judgment and impair my good judgment.
Investing carries risks; trade wisely!#币安Alpha公布第9批项目 #MicroStrategy增持BTC #币安MegadropSOLV #2025比特币价格预测 #BTC挖矿难度创新高 