Trading is a challenging activity that requires a combination of knowledge, discipline, and mental fortitude. Here are some common trading insights applicable to markets such as stocks, forex, and cryptocurrencies for your reference:
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### **1. Risk Management is Core**
- **Never bet all your funds**: Control the risk of a single trade within 1% to 5% of total capital to avoid significant losses from a single mistake.
- **Set stop-loss and take-profit**: Plan your exit strategy in advance; stop-loss protects your principal, and take-profit locks in profits.
- **Risk-to-reward ratio**: Aim for at least a 1:2 risk-to-reward ratio (for example, risking 1 unit for a potential return of 2 units).
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### **2. Emotions are the Biggest Enemy**
- **Avoid greed and fear**: Greed can lead you to over-leverage, while fear can make you miss opportunities or exit positions too early.
- **Stay calm**: Market fluctuations are normal; don’t let short-term ups and downs affect your judgment.
- **Accept losses**: Losses are part of trading; the key is to reduce mistakes through discipline.
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### **3. Plan Your Trades, Trade Your Plan**
- **Develop a trading strategy**: Clearly define entry and exit conditions, and avoid trading based on gut feelings.
- **Keep a trading journal**: Review the decision-making process for each trade and analyze the reasons for successes and failures.
- **Stick to your discipline**: Even when the market is volatile, strictly follow your plan and avoid changing your mind on a whim.
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### **4. Continuous Learning and Adaptation**
- **Understand the essence of the market**: Technical analysis, fundamental analysis, and market sentiment need to be considered comprehensively.
- **Adapt to market changes**: There are no forever effective strategies; methods need to be adjusted when market styles shift.
- **Simplify tools**: Avoid over-relying on complex indicators; focus on core signals (such as trends, support and resistance, and trading volume).
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### **5. Capital and Time Management**
- **Light position trial and error**: Use small positions to verify new strategies or uncertain market conditions.
- **Diversify risks**: Avoid over-concentration in a single asset or direction.
- **Avoid frequent trading**: Overtrading increases costs and the probability of mistakes; patiently wait for high-probability opportunities.
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### **6. Common Misconceptions and Lessons**
- **Counter-trend trading**: Do not attempt to “catch a falling knife”; do not blindly bottom-fish or top-tick before a trend has clearly reversed.
- **Revenge trading**