01 Success and Failure Depend on Yourself
Doing the right thing in the market almost always brings pain. People inevitably choose to avoid pain, but avoiding pain also means avoiding success. Therefore, successful individuals are always in the minority. Self-reflection brings pain too because it means acknowledging your past failures, causing people to repeat the same mistakes. The journey of trading is one of learning. Failure is almost always self-inflicted. In the market, you must change your frequency to follow it. Few are born for the market, so to succeed, you must change! Correct past misconceptions and bad habits while practicing correct behaviors until they become habitual. Emotions lead to chasing highs and cutting losses hastily, so they must be controlled. Human nature resists easily admitting losses, but you must get used to the feeling of accepting losses. People also resist giving up current profits to increase positions, so this short-sightedness must be overcome. Learn the steps of successful people. The quickest way to learn is to imitate. I completely abandoned my old self, threw away my pride, bought all the books written by world traders and studied their experiences. Every word of theirs is ingrained in my mind. I recite and practice every day. I've never doubted their words' veracity, unlike others who doubt that making money in the market is even possible (then why stay in the market if you think this way?). I'd rather listen to a top trader's single piece of advice than believe in a failure's opinion. I only trust top traders and myself. Now I can accept losses easily, enter the market without hesitation, and add positions confidently. I am not a genius; I rely on practice. Initially, I practiced through pain because I knew it was right and persisted. You must discard all wrong habits and practice correct actions until they become second nature. That's how you'll succeed. Isn't it the same for all top athletes? They constantly repeat the right things and avoid hindrances to success, hence their success. Everyone must personally experience failure to understand it, and everyone must learn their lessons to truly grasp wisdom.
The Path of Trading is Lonely
I no longer spend as much time studying the market's patterns as I used to. It's either up or down; I just see it as an opportunity. If I feel something, I enter the market. If it doesn't feel right, I stop-loss; if it feels good, I continue. The market verifies my strategy, with my subjective direction determining whether I go long or short. I follow successful traders' advice, step by step, drafting strategies and strictly adhering to principles. I suggest others do the same. I don't know how many actually take time to draft and execute strategies, how many are as diligent as I am, or how many can independently trade successfully because of this. Few truly understand the secret of trading, and even fewer are willing to calm down and ponder success. Everyone uses their own thoughts, unwilling to look at successful traders' suggestions. A successful trader's 20 years of experience can be obtained from a book for 300 yuan, but people prefer paying 1000 yuan for a nonsensical analyst's speech just for some tips and market predictions. Do losers deserve sympathy?
03 Trading Planning
There's a saying: "There are thousands of ways to make money in the market, but it's ironically tough to find one." Many enter the market thinking trading offers an easy way to wealth, but the essence is often hidden beyond sight, while visible parts deceive, including making money. In hindsight, assume you have a sense about last year's market. At 9000 points, you start to look bearish, expecting a drop to 5000 points with a capital of 500,000 yuan. How much do you think you'd make? Most retail investors would respond as follows:
I asked a few people, and they answered:
1. Place one short position with 500,000 yuan and roll over contract positions. If it drops to 5000 points, you'd make 800,000 yuan and close at target price.
2. Place two short positions with 500,000 yuan (margin was about 180,000 yuan last year). Roll over constantly, and if it drops to 5000 points, you'd make 1.6 million yuan. Quite a lot, right?! Clearly, if you have trading experience, such thoughts would seem naïve and lack factual considerations. The real situation would encounter several problems:
The first scenario:
Of course, if your market judgment is more precise (I'm omitting market details for explanation), and you calculate the sizing accurately, the return rate would be higher. Notice the performance I've boxed from start to finish, exposing very little risk even as position sizes increase. Some call this compounding, where positions grow larger but potential returns expand exponentially. I mentioned before that some made significant profits last year by heavily shorting every rebound based on strong bearish views, waiting to reaped their rewards. This is a true story of a 35-year-old seasoned trader who started building short positions around April-May last year with 1.2 million yuan. Early this year, he stopped profit-taking with 14 million yuan, his capital reaching 15 million yuan, achieving a 1100% return! He told me his average stop-loss, including trading costs, was just 15,000 yuan (1.25%), an incredible risk-reward ratio deserving his big win! Hence, well-executed long-term strategies can yield massive profits without exposing excessive risk. Of course, your long-term judgment must be somewhat accurate. One major market move can make your asset multiply tenfold. Conversely, short-term trading requires professional judgment, as repeatedly entering and exiting to capture small gains compounds profits over time. The downside is heightened stress, possibly causing hair loss, and the need to closely monitor the market daily. Success in short-term trading heavily relies on your accuracy, necessitating a 40-50% win rate over 100 trades to be profitable, theoretically leading to significant gains, though real-life execution may vary. While short-term trading isn't impossible for making money, many might give up on diligently relying on it before becoming wealthy. Medium to long-term traders rely on strategies and occasional significant wins to boost performance. Larger capital typically sways them toward medium to long-term strategies rather than short-term trading. But remember, trading isn't just prediction. The joy comes from planning and watching the market move within your strategy, calmingly earning profit. Small-scale trading during non-major movements supplements your household without much concern as it won't make significant money. The focus should always be on your own planning. There's always someone better. Don't mock those who differ from you based on short-term market movements. Focus on your performance instead. Trading is a long journey; short-term achievements mean little. Even a month's victory doesn't guarantee long-term success. When you have a good market idea, prove it with your position. Don't stress over individual wins or losses; think about your true goals. Richard Dennis made 200 million dollars, 95% of which came from just 5% of his trades. How? Through thought, planning, discipline, and execution, not luck.
04 Trading Market
What is the market itself? What is its unchanging essence? No one truly knows, yet it doesn't matter. The market you see helps you understand yourself better, getting you closer to the market's essence. It's a two-way interaction, always has been. After an unexpected unfavorable market move, you might curse the market's cruelty causing your losses, helplessly venting to feel better. Eventually, you see your innate emotions, changing your behavior to handle small losses calmly, preventing them from growing into massive ones. You'll realize you understand the market better because you understand yourself better, hence getting closer to the market.
Some spend their lives exploring the market yet never understand themselves, never realizing their mistakes aren't the market's fault but their own undoing.
05
Risk-Reward Ratio
What must be emphasized is that regardless of being right or wrong, it doesn't matter. You must have your own trading system, knowing when to act or refrain. Acting might not always yield profit, but you must seize those trading opportunities. My minimum acceptable risk-reward ratio is 1:3. That means I'll trade when there's a potential 300-point move, otherwise I refrain (because with a 1:3 ratio, winning 3 out of 10 trades yields positive returns. If you raise capital to 1 million yuan per trade, each trade's maximum loss is about 2% of total capital. Such capital management is a good allocation, with risks within an acceptable range, unaffected by fluctuations). Catch a 1:10 opportunity, and making money becomes easy, regardless of a few incorrect predictions. Remember, trading isn't about being a perfect fortune-teller but making money. Your goal in trading is profit, not becoming a revered prophet. Many fail not because of wrong market predictions but poor capital management. Simple questions about someone's maximum profit and loss per trade can reveal if they're winners or losers.
Market research serves only one purpose: finding trading opportunities. Always consider potential profits versus risks, disregarding small losses. Your entire trading system deserves the most attention, as individual systems vary. From this viewpoint, various scenarios arise:
1. Some points where you know the market will rise aren't suitable for entry due to poor risk-reward ratios;
2. Some points present uncertain market moves, but entry is still feasible due to significant profit potential;
3. Buy points for others may not suit you;
4. Your entry points may not suit others;
5. Others' bullish or bearish views might be irrelevant to you.
If you truly grasp these concepts, "stable performance" will no longer be a mere fantasy goal. "To succeed, you must transcend the guessing stage." Grasp this statement's meaning. Technical analysis, fundamental analysis, or fortune-telling—all involve guessing market movements. Spending all your time predicting market trends almost guarantees failure. Building a system creates a favorable environment for trading. Everyone aiming for success should have a suitable trading system.
06
Risk Management
Lost in the Stock Market
Trying to catch every turning point is a flawed goal, not leading to maximum profits. Technically, it's challenging. Markets change rapidly, and catching even half is impressive. Excessive effort here often yields diminishing returns.
Psychologically, it can drive you crazy, causing anxiety and spoiling otherwise good trading opportunities. Fear from uncertainty often leads to smaller capital investment, embedding a hidden caution that affects trading confidence long-term.
"Don't get lost in market predictions." Successful prediction without committing significant funds is common. The real profit secret isn't predicting turning points but following trends, letting profits soar. Those adept at this can exponentially boost modest returns. Once profits show and trends emerge, add positions. If you master adding positions, you won't obsess over a single "magic trade" and will reduce the panic of missing out. Effective stop-loss execution also becomes easier, knowing every trade has great potential. Where to add positions most profitably? Find what fits you best and use it. Pair this approach with stop-loss execution, and it becomes incredibly powerful. Those with "unbelievably high returns" succeed by maximizing this strategy, not by perfectly predicting reversals to catch all profits. This straightforward approach significantly enhances performance.
10
Investment? Speculation? Gambling?
Speculating without the market stabilizing first, using real money to guess the bottom, is unwise. Speculation involves making appropriate decisions when odds favor you within a reasonable risk-reward ratio. Long-term profits make you a winner. Winning ten trades but losing it all on the last means you still lose. Confidence versus arrogance
Value every single loss seriously. Many intentionally forget failures. Few face their mistakes, repeatedly finding hot stocks, making minor profits, suffering big losses, using all funds in uncertain markets, following others blindly, and refusing to cut losses.
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