The best state in trading is to maintain the mindset of an 'outsider'.
(1) Do not be overly optimistic when opening a position, do not hold extremely high psychological expectations, while also not being overly cautious, magnifying risks by second-guessing; when taking action, do not be influenced by emotions.
(2) Being able to correctly position oneself, comparing and analyzing local trends and overall trends at the same level, forming trading ideas without being limited to small scales or being overly reliant on larger cycles.
(3) Clearly understand what high-value entry signals are, concentrate all confidence on opportunities with a chance of success, just like closely watching a lighthouse in the fog.
(4) Always believe in your trading ability, confirm your advantages only from high-value signals, do not speculate on the results, so naturally, you will not have the thought of 'being afraid of losses'.
For 'not being overly optimistic or conservative when opening a position', the key is not to associate current trends and future results in your mind after opening the position, especially when making 'causal' speculations based on current trends, which can lead to assumptions.
For example, if there has just been a pullback, one should not hold onto the position and instead analyze whether it will reverse. It is important to know that the position held determines the mindset; as long as you focus on analysis, you will definitely find the explanation you want. Excessive expectations can lead to overestimating the likelihood of extreme market conditions, unconsciously extending short-term plans to bet on larger-level reversals.
In other words, those who often touch turning points, regardless of how they judged beforehand, tend to make assumptions after opening a position.
It seems that every small turning point has the potential to evolve into a major reversal, but in fact, this probability is often less than 20%. Blindly increasing the position level will likely face the problem of profit retracement.
So I think the key is to develop the habit of 'opening positions according to the established plan, not analyzing further after opening, and minimizing temporary interventions', because before opening a position, there are no relevant influences on interests, and the judgment of the trend is undoubtedly relatively rational.
Once there are influences on gains and losses after opening a position, analyzing the trend can easily lead to bias. Moreover, responses made during trading can easily be disturbed by various negative emotions, greatly increasing the likelihood of making basic mistakes.
Therefore, a rigorous analysis is needed before opening a position, and after opening a position, one must learn to let go. When holding a position, avoid looking too often and intervening, and try to adjust the position according to the plan.
Achieving these four points can control issues like hesitation in opening positions, panic in holding positions, and always trading against the trend.
At the same time, what does 'correctly positioning oneself' mean? The focus of trading is not to become complacent after completing the plan; when encountering unexpected changes during trading that do not fit the plan, choosing temporary interventions and then casually discarding the plan will disrupt the thought process, leading to an inability to maintain a correct position in the long run.
It is very likely that the original idea was a medium-term bullish one, and the position was scared away by a rapid short-term drop. The trend pattern was not destroyed, but upon seeing a large candlestick in the short term, one could not help but chase the rise and cut losses, ultimately going against the trend.
On the surface, it seems to be a technical problem, but at a deeper level, it is an inability to continue one's own thinking.
The plan is reasoning that precedes the trend, and it may more or less have the problem of not fitting the trend because we are not omniscient. When analyzing the trend, it is easy to let interests influence the trend assumptions, making it feel very smooth and quick to start, easily determining the success probability of some high-value signals.
In other words, the prior plan often contains a large degree of optimism, which needs to be corrected in conjunction with the specific trend, rather than completely discarding it just because it doesn't fit the actual trend.
Starting from this point, the best approach is to first formulate a medium-term plan. When seeing short-term market changes, do not consider what trades to make immediately; instead, open the plan to see if it falls within a reasonable range, ponder and then refine the plan's thinking, so that you will not easily change your position.
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