Trading is actually a game of probability, and many investors, after years of market practice and paying a certain amount of tuition, have finally come to the profound realization that the essence of trading is actually to make mistakes. The speculative market does not rely entirely on the winning percentage to win, but more often on the odds, on the risk-reward ratio to win.
The rules of successful investing are summarized in three points: lose well, make small mistakes, and win big. Many investors are often unaware that trading is actually a "loser's game" and that those who are best at losing are more likely to win in the end. Successful investors, like most market participants, have a 35–50% success rate. But ultimately, the main reason for their success is that the size of their money-making transactions is much larger than the size of their money-losing transactions.
But in practice, many investors do just the opposite, they often make a little money and rush to the bag, and once trapped, they are not willing to take small losses, but constantly deadweight, until they are finally forced out of the market. Such an operation, even ten consecutive profits can not make up for this huge loss.
A. Making mistakes is part of trading
For trading mistakes, investors need a correct perception. This is because once a loss occurs in any investor's trading, not only does his or her account money suffer, but also his or her self-esteem suffers at the same time. Failure to properly understand losses can lead to self-blame; continuous losses can even lead to low self-esteem, which can lead to a state where one cannot make mistakes. As Soros said, risk is not scary, what is scary is the uncontrollable risk! First of all, it is important to understand the three elements covered by trading mistakes.
One, making mistakes will accompany the investor throughout the trading process and cannot be avoided. People are not saints, who can not be fault? Life is like this, and the always challenging risky investment market is even more so.
Secondly, as an investor, through the improvement of their own cultivation, the development of market-proven trading rules system, and strictly in accordance with the trading rules to implement, to minimize the chance of making mistakes. At the same time, three times a day, through continuous summary and reflection, timely discovery of the mistakes they make.
Third, since mistakes are inevitable in trading, it is indispensable to admit mistakes at any time and take practical measures to correct them and establish the necessary error correction mechanism. How to get the expected return with the minimum cost is the essence of the risky investment market.
Second, be a wise "loser"
"Cut your losses and let your profits run" is the rule for all risky investments or speculative markets, but it requires a high degree of self-control, and investors can start by referring to the following recommendations.
- Develop a standard adapted to you
Develop a standard of right and wrong that is adapted to you, not to the market, because at any time the market, it is impossible to give you a clear and certain standard of right and wrong. Is it wrong to enter a trade and end up in a trap? In fact, as long as you do not reach the stop-loss point, the trade is still in the right state. Right and wrong cannot be judged by profit and loss, but by the quality of profit and loss, only a small loss if you are wrong and a big win if you are right, otherwise it is wrong. In fact, the criteria for judging right and wrong can make the method of setting the stop-loss point, and whether the operation is implemented in place. - Allow mistakes
Losses in trading are very normal and should be seen as the price and cost that must be paid before profits can be made. Trading opportunities are searched for, not just a glance, and it is a fantasy to succeed without paying the price. If investors do not allow themselves to make mistakes, then in the trading process is bound to behave unusually careful, this highly nervous mindset, will produce two inevitable results, one is once done wrong but do not admit it and thus burst, the other is too cautious and therefore miss a good time to trade, which are trading taboo. - low-frequency trading
Frequent trading will lead to a significant increase in transaction costs, and the possibility of error will also be greater. Therefore, low-frequency trading is the basic rule that should be adhered to, must develop a trial position and habits, so as to ensure the safety of the overall capital, but also to be able to critical moments to be able to strike. - Trading with the trend
Technical analysis must be coupled with fundamental analysis to be able to more accurately distinguish the commodity trend. In the study of the direction, homeopathic operation at the same time, to seize the turning point or acceleration point, because these points are often more important, and even sometimes, this is more important than the direction, because the dramatic price fluctuations may be completed in a few days. - Discipline and strict stop loss
Discipline and strict enforcement of the right and wrong criteria you set for yourself are prerequisites for profitable trading. Longevity is necessary if lasting victory is to be achieved. Stop losses can switch us quickly from one swing to the next, and take profits even more so, with the aim of being able to take advantage of better opportunities. After the investor enters the market, he needs to use his own judgment criteria to determine whether to get out or hold, and once the stop loss is hit the only thing to do is to exit decisively.