Trading skills are relatively easy to learn, and relevant teaching materials can be found online or in trading classes. However, what truly tests is personal interaction.
Easy mindset and thinking. Next, I will share these 15 trading experiences that have continuously guided me towards the right trading direction.
These experiences are what I have summarized from real trading, and they play a crucial role in cultivating the correct trading mindset and way of thinking.
I hope that by sharing these experiences, I can help more novice traders who have just entered the trading world or traders fighting in the market to achieve better trading performance and reduce unnecessary troubles. Become a highly defensive trader.
Becoming a trader with a strong defensive awareness is a key transition for novice traders on their trading journey. Many beginners may be deceived by a desire for quick profits, hoping to make money quickly, even trading with a mindset of 'getting rich overnight.' However, a more practical and feasible mindset should be: maximize the protection of your capital. These two mindsets cannot coexist; if you focus solely on quick profits, your capital is likely to be lost more quickly.
A rule from the sports arena applies equally to trading: offense is the best defense. In this context, it means only trading under favorable conditions, while protecting your capital and staying away from the market at other times. Beginners may achieve success in their first few trades by luck, but luck cannot last. You should be wary of the 'beginner's luck' trap.
Imagine if you held a gun; unless you are absolutely certain you can hit the target, you wouldn't waste a bullet easily. The same principle applies to trading: preserve your capital and only take a 'deadly shot' when a truly favorable opportunity arises. Protecting your capital to the maximum extent is the key to success in trading. As long as you can effectively control risk, even when encountering strong entry signals but ultimately failing, the impact on your capital can be kept within a reasonable range.
Frequently checking charts and continuously monitoring trades often have a negative impact on trading. In life, excessive interference usually does not lead to good outcomes. If you constantly try to over-control your trades, the result may be counterproductive and bring you more trouble.
Have you ever unconsciously increased your position or exited a trade early due to excessive focus on the chart? In hindsight, did you feel you were too impulsive at that moment? Such unplanned behavior is often one of the reasons many people incur losses.
The simplest way is to set a trading plan and then forget about it. This is a principle I often emphasize to beginners and one of the most valuable lessons I've learned: the less you interfere with your operations during trading, the better. Simply follow your trading plan and let the trades proceed according to plan; that is true trading wisdom.
The result of the last trade should not affect the next trade. The outcome of the previous trade should not influence the next trade. This is an extremely important principle, but many people often forget it. They can easily be swayed by the result of the last trade. However, it is essential to understand that each trade is unique, and trading decisions should be made independently.
The results of trading are randomly distributed. Suppose you conducted 100 trades; the gains and losses may be roughly equal. However, their distribution cannot be so uniform. It is possible to have 5 or 10 consecutive losses, and if these losses affect your mindset, then the upcoming profitable opportunities might also be obstructed by your emotional state.
It is also important to note that after experiencing profitable trades, excessive confidence can have a negative impact on trading, just like fear after losing trades. Overconfidence makes people more willing to take on excessive risks, and in the long run, its negative impact can be quite severe. Therefore, maintaining calm in trading and not being swayed by short-term results is key to maintaining a stable mindset and achieving long-term success.
Simplify trading, and you will reap more.
In trading, moderation is key. Many mistakes that traders commonly make include overdoing things. They excessively analyze the market, over-interpret market trends, overthink, and overtrade, overall doing many unnecessary things. As a trader, learning to be appropriately 'lazy' is equally important.
First, it is crucial to clarify that favorable signals in the market are limited, and often very few within a certain timeframe. Most of what you see and hear may just be 'market noise' that is of no benefit to you. Learning to filter these signals and then select the truly beneficial 'high-quality signals' is a routine step in seeking opportunities.
Secondly, I recommend you learn the mindset of hedge fund traders for trading. They handle millions or even hundreds of millions of dollars, but trade with very strong principles, only selecting the highest return opportunities as if picking diamonds from sand. For those signals that are 'possible' or 'seem to be,' I advise you to stay away. In my 20+ years of trading experience, the best trades have always been the most obvious and intuitive ones.
Have a clear exit plan before entering the market.
In trading, no one tells you what you should do. You must set your own rules, which means you have to be responsible for your actions. Many people lack this self-control, leading to a frequent loss of trading direction.
Before trading, one of the most important tasks is to determine an exit plan. It took me several years to realize: exiting is more important than entering. Observations reveal that many people's exits are capricious, resulting in either minimal profits or significant losses. Establishing a strict profit-taking and stop-loss plan is the best approach. Such a plan can provide you with clear guidance, allowing you to stay calm and execute the plan regardless of whether you are in profit or loss. This disciplined exit plan helps ensure that you maintain a clear mind in trading and reduce the impact of impulse and emotion on decision-making.
Avoid worthless trading
In the world of trading, worthless trading refers to trades where risk and profit are disproportionate, often occurring when traders are blind and trade frequently. Such trades often lead to losses exceeding profits, affecting traders' mindsets and even trapping them in a vicious cycle of losses.
Specifically, this is reflected in traders facing a volatile market, who rush to enter upon seeing so-called 'opportunities' without considering the profits and risks of the trades. Such blindly entered trades are usually driven by luck, assuming that even a small profit counts as a gain. They overlook the large risks for small profits and view any market movement as an opportunity not to be missed, magnifying small opportunities subjectively and impulsively executing trades. This attitude not only shows disdain and disrespect for the market but also makes it difficult to achieve good results in the market.
For professional traders, they usually formulate trading plans and set stop-losses in advance to ensure that even if they incur losses, the impact is not too great. However, losses from worthless trades are different because these traders generally have a shallow understanding of the market, make trading decisions somewhat randomly, and lack careful consideration. Such avoidable losses are more harmful than beneficial for a trader's growth.
High discipline
High discipline plays a crucial role in trading in financial markets. It refers to traders following a series of clear rules and principles when trading to ensure effective risk management, achieve investment goals, and avoid adverse consequences from emotional and arbitrary decisions. The level of discipline is directly related to the success of trading and is considered one of the key factors for successful trading.
I insist on emphasizing that trading decisions should not be influenced by emotions. Every day, I only spend half an hour reviewing charts, deliberately avoiding excessive observation.
Market fluctuations. I advise traders to strictly adhere to their trading plans.
Avoid over-analyzing the market, as disciplined execution is the cornerstone of stable profits. By following a predetermined plan, I can remain calm, avoid emotional decisions, and thereby improve the efficiency and stability of trading.
Most of the time, you should stay away from the trading desk. A wise strategy on the trading path is to maintain distance from the market. Overtrading is often a shortcut to capital loss, and remembering this is crucial.
I strongly advocate using a larger timeframe to examine market trends. This approach acts like a natural filter, eliminating much unnecessary information interference. By doing so, you can more focusedly execute your trading plan, ensuring efficient utilization of trading opportunities. In my view, daily charts are the best choice for technical analysis.
Do you sleep soundly at night?
To understand your trading stress levels, the most intuitive method is to conduct a sleep test. If you are taking too much risk in each trade, then that trade will haunt your thoughts like a nightmare. When you lie in bed, are you often troubled by worries about trading? Do you wake up in the middle of the night and feel compelled to check the market with your computer or phone?
If you find yourself caught up in these emotions, then your trading may have serious problems. Maintaining long-term trading and profitability requires effective risk management. If anxiety has begun to affect your sleep, it means that your trading risks have exceeded your tolerance.
Timely adjustments of positions and the input for each trade are vital. Everyone should maintain a cautious attitude towards this.
Before real trading, you need to remember these two key points to ensure your trading does not turn into gambling.
First, you must have a clear trading strategy. In real trading, a lack of strategy can easily lead you astray, resulting in losses. It's best not to rush into trading until you fully understand your strategy. Remember, do not try to use multiple different trading methods simultaneously, as this will only make things more chaotic.
Secondly, capital management is crucial. Without sufficient capital, you cannot trade long-term, let alone achieve profits. Therefore, deeply understanding the importance of capital in trading is essential. Do not waste your capital rashly, as it is your lifeline on the trading path. With effective capital management, you can better protect your investments and ensure stable operations in the market.
How is your self-control? This is very important.
The success or failure of trading depends not only on rational strategies, trading plans, and capital management but also on psychological self-control. The trader's mindset can be said to be the dominant force in trading rhythm, and successful traders must possess strong self-control.
In trading, the biggest challenge does not come from capital issues but from personal emotional fluctuations. A negative mindset can weaken one's ability to respond to good trading opportunities, becoming the biggest trap in trading.
Allowing self-emotions to fluctuate can lead to a loss of rationality, gradually eroding the clarity of trading decisions. Confidence is key to successful trading, but overconfidence can become a breeding ground for negative emotions.
In trading, a principled person can better master self-control and maintain calm. Trading does not require excessive expression of personality, but rather a steady execution of plans and consistently rational decision-making. By establishing a solid psychological foundation, traders can better cope with market fluctuations, ensuring a more stable and successful trading process.
The more favorable factors, the better. The success of a trade hinges on obtaining more favorable factors, as this increases the likelihood of profit. In trading charts, if trend lines, important chart levels, and trading signals can align, then the trade is more likely to be profitable.
Although many traders seek to avoid human errors through automated trading systems, I personally do not favor relying on such systems.
I believe that as long as you can find the intersection where trends, support lines, and signals align, you can effectively execute trades without worrying about the quality of the trades. Unity and consistency are key in trading decisions, which can be achieved by effectively integrating various supporting factors.
Do not increase positions in loss.
In trading, focusing excessively on win rates while neglecting risk management is a dangerous mindset. I maintain the view that one should not continue to increase positions when facing losses, as this only turns trading into gambling. I believe a successful trader should have risk awareness and avoid taking risks rather than pursuing a doubling of their account in a short period.
Some traders view profits as a secondary goal, placing greater emphasis on proving their viewpoints correct. However, pursuing high win rates while neglecting risk management is an extremely dangerous attitude. When a trade goes wrong and goes against market trends, some traders not only fail to set stop-losses.
Instead of closing positions, they continuously add to their positions, hoping for a market reversal. This behavior makes trading lose its rationality and resembles gambling. Successful traders should focus more on staying calm and reasonably controlling risk rather than being overwhelmed by short-term high win rates.
Reasonable stop-loss, strict execution
Ensuring reasonable stop-loss and strict execution is a critical principle in trading. I have always believed that traders who do not set stop-losses may ultimately face the risk of a margin call. Set a reasonable stop-loss distance for each order and make wise decisions based on personal circumstances. Additionally, I must remind traders not to widen stop-loss distances when losing or to close positions too early when in profit.
After placing every trade, you should set stop-loss and profit targets, and stay away from emotional trading. Once set, it is best not to repeatedly check orders or charts, as such behavior may interfere with emotions. When seeing order losses, traders may be tempted to widen stop-loss distances, leading to greater losses. Conversely, when orders are profitable, closing too early may cause traders to miss out on more profit. In summary, constantly staring at the market can significantly impact emotions and mindset; the best practice is to set it and not intervene excessively afterward.
Wait patiently for the best trading opportunities
If you find this suffering unbearable, then waiting for a clear trend to emerge before taking action is also a good choice. The market is never short of opportunities; what is truly lacking is a preparedness attitude. In the world of trading, patiently waiting and ensuring your mindset is in the best state is the key to success. Do not rush to act; instead, wait for the right moment to develop because a clear trend will provide you with clearer direction.
In trading, the market often produces false signals or weak signals; however, the importance of waiting for the best trading opportunity is self-evident, much like a cheetah waiting for the best prey. For weak signals, we should not take excessive risks but should patiently wait for solid opportunities. Maintaining patience is crucial, as the market fluctuates continuously, but not every moment is the best trading opportunity.
Summary
Finally, I need to emphasize that trading is not everything in life; it is merely an investment method and should not affect normal life. Unless you are a professional trader, do not devote all your time to trading; you should have your own job and career.
In summary, successful traders need to adhere to simple and effective trading strategies, maintain high discipline, wait for the best timing, set reasonable stop-losses, avoid overtrading and risks, while also not forgetting that there are other aspects of life and career outside of trading. These suggestions can help more people succeed in the financial markets.
I have been preparing for the upcoming layout of a divine trade!!!
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