Secret One: The trend is your friend; do not go against it. The way to make real money is to identify the main trend and then follow it. If the market trend is against you, then you should exit. When you are in a bearish trend and the main trend is down, you should wait for a rebound and short the market instead of trying to pick the bottom. In a bear market, you may miss the bottom several times during its decline. The same principle applies to a bull market; always follow the tides and never go against them.
Secret Two: Pay attention to the market's reaction to price. This secret complements not going against the trend. When you consistently short undervalued markets for profit, those markets are also public favorites and have formed significant selling pressure. When soybean prices reached $6 per bushel in 1973, the public was shorting contracts at this record high, and it had already entered a resistance zone. Who would have guessed that the $6 price was not even half of the subsequent unprecedented high of $13? Always remember that price is not that important; what matters is the market's reaction to the price.
Secret Three: The best trades are often the hardest; you must have courage. You must trade boldly when you enter, and cut losses quickly when the market direction is wrong. News always sounds best at the top and most bearish at the bottom, which is why the technical atmosphere of the market is so important. If news is favorable but the market stops rising, you must ask yourself why and then listen carefully to the market. The bottom is often the hardest to understand, during which insiders are accumulating positions, and there may be some signs such as contrary trends, market fluctuations, and false reversals. After the bottom is formed, many traders look for the next breakout to buy. After all, the market has been weak for a long time, and the opportunity for an upward breakout becomes greater, right? But it will never happen.
Secret Four: Set a plan before executing. If you have established a plan and strictly adhere to it, you can avoid emotional trading, which is the greatest enemy of all trades. You must remain calm and focused during frenzied trading periods. To achieve this, you must be fully prepared before the market opens. You have tasks every day, and if you decide to accept them, you must aim to be profitable every day, or if you choose not to accept, at least avoid significant losses. Next, you must limit trading losses that do not align with your plan from start to finish. This requires willpower, which is as essential as having substantial capital. In fact, having significant capital is even more important. Capital is not meant to be tightly held in the market but to achieve overall growth. If you must take significant risks, do not engage in such trades. Wait for the right moment to set a smaller stop loss, and if your risk point is triggered during the trading period and you do not have enough willpower to endure losses, you must use stop-loss orders. The simple method is to set a stop-loss point as soon as you start trading.
Secret Five: Do not regret when you close a trade based on reliable reasoning. Never regret your decisions and continue to act according to your plan. If this decision proves to be a mistake later, all you can do is learn from it. We all make mistakes. Do not let these mistakes overwhelm you; otherwise, you will lose the correct perspective and become overly cautious in future trades. How can you completely avoid emotional trading? Do not think about your entry price, as it is irrelevant. If you feel something is off in the market, do not try to exit at a breakeven price after deducting fees. Constantly aiming to maintain breakeven will cost you more.
Secret Six: Money management is key. You should think about how to manage your funds every day. You do not necessarily need a high profit-loss ratio, but if you wish to succeed, your average profit must be greater than your average loss. Failing to achieve this means you must have significant wins. You must maximize profits on certain trades; you need these large profits to offset the inevitable multiple losses. You will find that as long as you can cut losses quickly, even if the losses from each trade accumulate slightly, it can greatly improve your bottom line. Therefore, if the trend is against you, have the determination to cut your losses. Moreover, canceling or extending stop-loss orders is not a good practice; you must never do that. You should know that canceling stop-loss orders is 99% of the time a wrong decision.
Secret Seven: Specializing in a particular area often leads to greater success. Each market typically has its characteristics; some usually build their tops or bottoms at the fastest speed, others form round tops or bottoms, some create double tops or bottoms, while others form tops and bottoms after long periods of consolidation. If you are familiar with the market's characteristics, you can better understand it. To become familiar with the market, focus and rich experience are required. If a particular market does not align with your personality, find another one and learn to stay away from markets that do not suit you.
Secret Eight: Be decisive in trading. Some traders are too reckless, resulting in excessive trading, while others hesitate to pull the trigger, and this weakness must be corrected. You must train yourself to trade in a way that is neither hopeful nor fearful. When you enter or exit a trade, make decisive trades without any emotion, especially important after experiencing a significant stop loss.
Secret Nine: Be time-sensitive. In other words, know how long it takes for each market movement to reach the target price. The longer the market fluctuates in one direction, the faster the buying or selling should be in the final stages of that fluctuation. Most of the significant movements occur within the last two days, and everyone hopes to still be in the market then. Although we say to be time-sensitive, we should also closely monitor the volume after a long-term market fluctuation. Volume is often higher than normal at the end of a fluctuation because it is a distribution area. Insiders are unloading their positions to the public, who are panicking due to the news release. In fact, it is important to recognize which stage the market is in, as each stage of the market often acts similarly. Most of the time, markets at the bottom will bounce back with lower volume, indicating that the actual amount sold is not large, and even previous bulls are starting to become cautious. Before the situation improves, the top will further weaken as the opposite of the bottom. Few people notice that the market is saturated; however, the market may stop rising. When it first breaks through the top, there is a high probability of a failed test with low volume. If the market fails to break through new highs and remains at a lower high, and you do not exit, this may be your last chance to leave.
Secret Ten: Pay attention to the market's reaction to news; this is very important. The news itself is not important; what is important is the market's reaction to the news. Undoubtedly, the news can attract public perception, but you must remain alert to the differences between the news and market movements. This entirely involves expectations versus reality, seeking the difference between what is happening and what people should think about these events. If a significant movement occurs, the general public always considers it from the wrong direction. Use the following methods to analyze the market's reaction to the news: first, if unfavorable news is released and the market starts selling off with high volume, it is likely that the market will decline. Second, if the market does not respond much to favorable news, it may mean that this good news has already been factored into the price. Third, significant movements tend to start before news is released; when the movement has begun, the fundamentals begin to slowly emerge. Fourth, buying after a flood of bullish news or selling after a quarterly bearish report is not a good practice because whether the news is good or bad, it is usually already reflected in the price.