No matter in which financial market, for the majority of individual investors, 80% of them are losing money, half of the remaining 20%, that is, 10%, can break even, and the other half, 5%, can make a small profit, and finally only 1% can stand at the top of the market and make long-term and stable profits. As for the cryptocurrency market, I am only at the "student" stage, with 3 years of industry experience and more than 10,000 hours of real trading experience. I don't want to discuss what the holy grail of trading is for a few people, but I hope to provide some ideas for those investors who are still losing money.
If you want to move from the ranks of the majority (80% of investors) to the ranks of the minority (20% of investors), you need to make a lot of efforts. It is not easy to change your long-term bad investment habits. Change means to completely overthrow your original behavioral habits that led to losses, and it may also involve the use of some trading methods and the choice of trading opportunities, etc. To establish your own trading system is a systematic project. It cannot be completed overnight. Here I will share with most investors the top ten killers that lead to losses, hoping that it will help you establish good trading habits.
One of the top ten killers that lead to losses: Blindly entering the market
Most investors who enter the cryptocurrency market may only have some simple understanding in the early stage, and then try to do simulated trading, and then switch to real trading. How many investors really understand the market rules and characteristics? When entering the market, they are in a state of blind men touching an elephant, at least many investors I have contacted are like this. All market characteristics have two sides.
First of all, the market runs 24 hours a day. The long running time reflects the impact of various news and economic data on the market in real time. On the contrary, we cannot challenge the limit of our body to watch the market 24 hours a day, so we need to reasonably and scientifically allocate our energy to key time periods, such as before and after the opening of Europe and the opening of the United States.
Secondly, the contract mechanism. Cryptocurrency trading is a financial derivative. The biggest difference from basic financial products is leverage. High leverage provides an opportunity to make a small profit with a big investment. In fact, in contract spot margin trading, leverage is just a financing ratio. The size of leverage does not affect the calculation method of profit and loss of a transaction. However, in terms of the trading rules themselves, the investment market value of unleveraged financial investment products cannot be lost without a penny, and leveraged financial investment products cannot be fully entered and exited like unleveraged financial investment products. Position management is a sophisticated technology. Using leverage well can become a tool for making money, but using it poorly may lead to a warehouse explosion.
The third point is two-way trading. Many big Vs told investors that two-way trading would double the market operation opportunities, and they could go long or short, and even lock positions. Is this really the case? Putting aside whether the lock position trading method is conducive to trading, in terms of trading opportunities alone, many short-term traders are very sensitive to price fluctuations and frequently trade intraday, but not every individual investor is suitable for this. Here I think of a sentence: When God closes a door for you, he may open a window for you. In the market, this window is the many trading opportunities under the two-way trading mechanism, and the door is the door to profit. What I want to tell 80% of investors is how to close the window and open the door. Let me give you an example to start a discussion. In an upward trend, there will usually be a pullback. Most people know the principle of going long with the trend, but most people's trading behavior goes against what they have learned, that is, they will participate in shorting when they see signs of a pullback. The degree of the pullback often depends on the strength of the general trend (the initial premise is that it is a trend market, not a shock market). Is the timing of the pullback accurate? How much room is there for the pullback? How big is the profit space? Regardless of the profit and loss status of the position held, can you exit in time without wasting the new wave of upward momentum? If you don't have a perfect strategy and discipline for the above links, please give up the two-way trading opportunities in the trend market, go with the trend, and wait against the trend.
Finally, the news is transparent and the data is published regularly. It sounds like a relatively fair, just and open market, at least much better than China's A-share market. However, although the information is transparent, the data market often brings losses to most investors. Many people lack fundamental analysis, and many practitioners are also incompetent in fundamental analysis. They equate news analysis and data analysis with fundamental analysis, and even promote the assumption that technical analysis is all-inclusive. How can we avoid losses caused by data market? Here is a general principle: if you can't grasp the potential opportunities, just give up and don't do it.
Based on the above four points, investors who are new to the market may usually need to spend more time on simulated trading in order to slowly gain understanding.
The second of the top ten killers that lead to losses: frequent trading.
Due to concerns about the market characteristics that may lead to losses, most traders choose intraday trading. It can be imagined that frequent two-way trading during the day is not very helpful for long-term performance, but is prone to losses. In fact, frequent trading itself is not a problem. The problem is whether every transaction is reasonable. In unreasonable frequent trading, the probability of loss is much higher than the probability of profit, which affects the mentality. If you are eager to make up for the loss and continue unreasonable frequent trading, you will fall into market fluctuations, which will create a vicious cycle. To be able to endure loneliness and reduce the frequency of trading, don't be obsessed with trading opportunities. There are two ways: the first is to analyze the large-cycle market, such as the 4-hour K-line, and the second is to combine the time period with high intraday volatility to find effective trading opportunities.
The third of the top ten killers that lead to losses: chasing highs and selling lows.
This bad habit is constantly passed down between different investment markets and among individual traders. Most people have no method and are slow to react. They follow the market fluctuations based on market appearances, often buying at the ceiling and selling at the floor. They regard trading as gambling or simply guessing the rise and fall. How to avoid it? There is an extremely important component of technical analysis called position analysis, which needs to be learned and mastered. In addition, it is also necessary to overcome psychological greed.
The fourth of the top ten killers that lead to losses: the pursuit of high winning rate.
Many investors place too much emphasis on winning rate, and even pursue a perfect trading record. I have studied the trading records of many investors who have just entered the market. They make little profit and lose a lot, and the average profit is much lower than the average loss. This is enough to show that winning rate is not the only factor that determines profit. The three elements of stable profit are: reward-risk ratio, winning rate and capital turnover rate. All three must be present.
The fifth of the top ten killers that lead to losses: unwillingness to face losses.
Since the trading frequency of the cryptocurrency market is much higher than that of the stock market, the accompanying loss opportunities are also increased accordingly. Most investors are unwilling to face losses, fear losses, and do not have a good and reasonable stop-loss habit. Thinking from another perspective, the market will trigger a stop loss if it proves that the direction of a transaction is wrong, thereby preparing for new trading opportunities. In this way, we limit the loss of the transaction and keep the profit open. This is the so-called "cutting losses short and letting profits run" (provided that it is in a trending market). However, many investors' trading behavior is just the opposite. They set a stop profit or exit immediately after a small floating profit. When they lose money, they always expect and fantasize that they can return to the cost price. They do not stop loss, which makes the floating loss more and more. Therefore, it is very important to establish a stop loss mechanism and form a habit. Soros's reflexive trading theory is based on strict stop loss.
The sixth of the top ten killers that lead to losses: heavy trading.
Most of the situations that cause most investors to suffer large losses or even liquidation are due to heavy position operations. Pursuing huge profits while ignoring risks will quickly lead you to the brink of death. In the cryptocurrency market, defense is the important factor that determines how long you can survive in the financial investment market, not offense. According to China's Sun Tzu's Art of War, trading is like controlling an army to fight. How to mobilize military forces to win a battle or a war at a small cost is very mysterious. Stop loss and small position trading are like initial tests, and then avoid the real and attack the virtual to obtain satisfactory returns. Therefore, position management is a more advanced technology based on mastering the three elements of profit. Investors who are new to the market need to have some taboos against heavy position trading.
The seventh of the top ten killers that lead to losses: casual trading.
There is a group of investors who, seeing a short-term turning point, or subconsciously planning a development path for the market, enter or exit the market at will without making any preparations. They lack a grasp of the overall rhythm of the market. Trading by intuition is the most important bad habit to overcome when entering the ranks of the 20% of investors. As for the market sense, it is the product of potential thinking patterns and trading habits formed through long-term trading training, which is fundamentally different from casual trading.
The eighth of the top ten killers that lead to losses: lack of firm stance.
Many times, due to mentality or other interferences, investors may be worried about the best time to take action after an entry or exit signal appears, which may lead to losses, or they may rush to trade without fully meeting the entry or exit conditions. Often, these trading behaviors reflect an investor's immaturity and lack of confidence, and they need to establish an analysis system and a trading system and strictly implement them to improve this.
Nine of the top ten killers that lead to losses: greed and fear.
More often than not, we understand greed and fear as a mentality problem. We are afraid of losing money, afraid of missing out, not daring to hold, and holding too much. In fact, these mentalities that lead to losses are not the real reasons for the losses. People are unwilling to admit their decision-making mistakes and attribute them to their mentality. This is not conducive to improvement. We must truly understand ourselves, have a clear positioning of our trading roles, and strictly implement trading decisions and trading disciplines. Only in this way can we overcome the mentality. Imagine that all trading behaviors fully comply with the trading rules, open positions when entry signals appear, and close positions when exit signals are met. How can greed and fear still play tricks?
The tenth of the top ten killers that lead to losses: lack of discipline.
Most investors know the importance of trading discipline, know that they should follow the trend, and know that they should not chase the rise and sell the fall, but few of them know how to do it. Without discipline and rules, how can they be implemented? Changing your bad trading habits is a difficult thing, but you have to start slowly. In fact, in such a large financial market, your biggest opponent is yourself. When you decide to join a financial market, you should start to formulate trading rules and disciplines for yourself.
If you can overcome the above ten aspects well, you will take a big step from the ranks of the 80% majority to the ranks of the 20% minority. If you cannot make a profit for a long time, wander in the ranks of the 80%, and cannot find the door to trading, then please stop for a while, take a good summary, and think about what kind of rules and disciplines you can set for yourself to overcome the large losses in your trading records.
