Trading is very flexible. Trading discipline only applies to novice traders who have not developed good habits. For experienced traders, imposing too much discipline on themselves will only restrict them (as long as they do not make principled mistakes).
There are many ways to make money, but the summarized experiences and lessons are always the same.
01: Capital usage: Divide your capital into 10 parts, and the risk you take in each trade should not exceed 1/10 of your principal.
The benefit here is that for newcomers, it’s a good practice to trade without worrying about emotional fluctuations with price changes. I recommend that newcomers divide their funds into 20 parts, with each loss not exceeding 1/20 of the principal.
The market changes every day. Save bullets to be ready to fire at any time.
02: Set stop loss orders: set a stop loss when opening a position to protect your trade.
Before placing an order, prioritize risk. If this trade goes wrong, where will I stop loss? If I open a position here, where will my stop loss be?
In my ten years of trading experience, I have never seen a trader open a position without setting a stop loss. If you want to learn how to hit back, you first need to learn how to endure hits.
Mistakes are not scary; they are a necessary trading cost. What is scary is not setting stop losses. One wrong trade can wipe out the profits from ten winning trades. The confidence built up from the previous profitable trades will collapse instantly, and you will start to doubt and question yourself.
Another aspect is that to excel in your work, you must first sharpen your tools. As a trader, being professional means doing the fundamental work well. Just like an assassin preparing to open a position (hunting the target), you will do a lot of preparatory work in advance, such as understanding the target's habits, when and where they will pass by, their daily schedule, and what is the most repetitive thing they do every day, in order to formulate a detailed hunting plan. Then, how do I disguise myself? Where will I shoot? After shooting, which route will I retreat by? How much time do I have to retreat?
Therefore, this is something you must consider. There is no sympathy in a zero-sum market. You either hunt others or become someone else's prey, so you must be responsible for your capital.
03: Do not overtrade, as this will violate your capital management principles and lead to capital loss.
Then why not hand it over to a quantitative robot or a grid? They are more rational and mechanical than humans.
04: Don’t let unrealized gains turn into losses. Once you have more than three points of unrealized profit, set a protective stop loss near the opening price. Never lose your principal.
In the crypto space, a three-point increase is easy, especially for small caps. At this time, you can slightly widen your profit target and implement trailing stops, especially in a bull market where taking profits frequently is necessary to protect your gains.
Normal people cannot withstand the emotional rollercoaster when their unrealized profits turn to losses. Initially, they are happy and thinking about what they will do with the profits, but before long, unrealized gains turn to unrealized losses, leading to a feeling of falling from heaven to hell. Those whose minds are not strong cannot bear it; their emotions are easily influenced, impacting their decision-making abilities and leading to foolish decisions. When they finally wake up, they find their account balance has also significantly declined, and it’s too late to regret.
05: Do not go against the trend. If you are unsure of which way the trend is, do not trade.
You are not a god, nor the invisible hand that manipulates the market. You are not a great trader. So be honest, give up the fantasy of being destined for greatness, follow the trend, and do not try to be a dragon slayer. If you cannot currently judge where the trend is going, stop, relax, and spend time with family and friends. Do not gamble or guess; there will be many opportunities, so there’s no need to rush.
06: If in doubt, exit the market.
If you can't see the path forward, don't force it. The market is not yours; no one will pity you.
07: Only trade active stocks, and stay away from illiquid assets.
Why bother with coins that only have a few million in daily trading volume? Why not trade some more liquid assets?
08: Diversify your risk by trading multiple stocks instead of going all in.
Jesse Livermore, a great trader, went bankrupt several times due to all-in bets. Should you learn from him? If you go bankrupt once, will your mindset be shattered? Do you have Livermore's trading skills and market insight? Do you still have capital to go all in again? If not, please be realistic and do not dream. However, in the crypto space, unlike stocks, some junk coins are better not to hold. Just focus on trading BTC and ETH.
09: Do not only use limit orders. Sometimes you need to respond flexibly and enter at market price.
Sometimes, when breaking through an important resistance or falling below an important support level, the market may accelerate. If you rigidly place limit orders, you may miss the opportunity to enter. Be flexible.
10: Do not open positions arbitrarily without sufficient reasons. Use trailing stop losses to protect profits.
Today I spent 800 on meals. I spent 2K on a technician today. I spent 20K on trading today. I bought a watch for 80K today. I bought a car for 500K today. None of these are reasons for opening a position. If you open a position based on these reasons, believe me, withdraw from this market as soon as possible, otherwise, you will be left with nothing.
11: Accumulate surplus. If trading goes well, transfer some profits to a reserve account for emergencies.
Trading is work, not life. Therefore, withdraw some profits timely to meet your living needs, so you do not have to beg others when the time comes. This also gives you a chance to make mistakes.
12: Do not buy stocks just for dividends.
Never buy a coin just because of an airdrop/staking.
13: Never average down. This is the biggest mistake traders can make (averaging down means buying at a lower price repeatedly).
If you buy 500 ICP and it drops to 100, you think it’s cheap, so you add to your position. Then it drops to 50, and you think it’s even cheaper, so you add to your position again. When it drops to 20, you think this is a rare opportunity, and you go all in. Now, all you can do is cry.
Admit your mistakes and stand at attention when hit.
14: Do not rush to enter the market due to impatience, nor should you exit due to a lack of patience.
You must act like a cheetah, ready to move at the right moment. Patience is your weapon, and waiting is your claw.
15: Do not make small profits and big losses.
It's like playing baccarat. Today I go in with 100 or 200 chips and win 500. I'm satisfied and I withdraw. The next day I win another 500, and I withdraw again, feeling happy. But by the third day, it doesn’t go as smoothly. I go in and lose 500, unwilling to accept it, and continue to gamble. I want to recover my losses, bet 500, and it goes wrong, losing 1000. All the profits from the previous two days are gone, and then stubbornly, I keep betting, throwing 500 or 1000 chips randomly, and end up losing a lot. This is a classic case of winning a little and losing big.
Every time you place an order, you take risks to earn a little profit, even if it hasn’t reached your target profit or protective stop loss, and you exit happily. But when you lose, you stubbornly hold on, even to the point of liquidation. If so, you are not suited for investment trading and even less for gambling. Casinos love people like you because you won’t always have good luck. You win a little every day, a few hundred, but when your luck runs out, you overcommit with heavy bets and lose tens of thousands. You are just the kind of inexperienced trader that the market loves.
16: Once a stop loss is set, it cannot be casually canceled.
Stop losses are something you planned before opening a position. Unless something significant happens, do not cancel your stop loss arbitrarily.
18: Be willing to go long but also willing to short. Align your trades with the trend; this is the way to make money.
You should be just as willing to go long as you are to short. Neutrality is an essential psychological quality for traders, allowing you to make objective judgments.
19: Do not buy just because the price is low, nor should you short just because the price seems too high.
Low can go lower, and high may remain high. These are not reasons for going long or short.
22: If the position is wrong, do not hedge. If you are long on a stock and it starts to fall, do not short to hedge. You should stop loss and exit, waiting for the next opportunity.
If you are wrong, you are wrong. If you shot, you shot. Take care of yourself and move on to the next.
23: Never change your trading plan without a good reason. To execute a trade, there must be sufficient reasons, and it should be carried out according to the established plan. Do not leave easily before the trend reverses.
Trust your judgment. If you are wrong, you are wrong. Learn from your mistakes, and the most important thing is to remember them.
24: Do not increase your position size just because you made a profit.
Making money over a period does not mean your skills are good; it may just be luck. Therefore, give yourself more time. Even if you are profitable for a long time, do not think about increasing your position size. Otherwise, money earned by luck is likely to be lost due to your misguided confidence.
The above is the trading experience shared by Muxing today. Many times, you lose a lot of profitable opportunities due to your doubts. If you do not dare to try boldly, to engage, to understand, how will you know the pros and cons? You must take the first step to know what the next step should be. A warm cup of tea, a piece of advice, I am both a teacher and a good friend who can talk.
Meeting is fate; knowing is a bond. Muxing firmly believes that those destined to meet will ultimately do so, while those who miss are destined to pass by. The journey of investing is long, and temporary gains and losses are just the tip of the iceberg. Remember, even the wisest will occasionally make mistakes, while the foolish may have unexpected gains. Regardless of your emotions, time will not pause for you. Pick up your frustrations, stand up again, and continue your journey.