He is an old player in the capital market, having struggled for about ten years. He relies not on insider information but on his own understanding, gradually building his capital from 100,000 to 1 billion.
He shares all his insights from becoming a 'leek' to a big player, which is very valuable for us to learn from.
The reason everyone likes him is also because he:
1️⃣ Inspirational stories of turning adversity into success
He started as an ordinary retail investor, experiencing significant drawdowns multiple times but returning to peaks. This experience of 'falling and then rising again' resonates with stock investors.
2️⃣ Operational style close to retail investors
Living Off Trading primarily focuses on short-term trading, hitting boards, and tracking capital flows. His style is not as aloof as some institutions or big names, making it easy for retail investors to learn and apply.
3️⃣ The spirit of sharing
In the early days, he generously shared many #short-term trading practical experiences, trading systems, and case studies on Weibo, benefiting many retail investors.
4️⃣ Low profile and authenticity
Unlike many so-called stock gods who flaunt their wealth and sell courses, he always keeps a low profile, never promotes courses or builds paid groups.
He is 'Living Off Trading', a very famous retail investor in the stock market.
Investment is a discipline; once understood, one can master it. I have sorted out his primary #trading strategies for everyone’s reference.
This article mainly outlines:
1️⃣ Overview
2️⃣ How to trade short-term
3️⃣ On position and winning probability
4️⃣ How to formulate phased strategies
5️⃣ What is the profit effect
6️⃣ How to view the big picture
7️⃣ Mindset and emotions
8️⃣ Thoughts on value investing and short-term trading
9️⃣ Quantitative techniques
1️⃣0️⃣ How to do T
1️⃣1️⃣ How to do effective risk control
The following is the original text:
The principles of living off trading are more about stock trading philosophies, akin to martial arts principles in the martial world, where a strong internal skill is essential for navigating the world. Please savor it slowly. Of course, the article also mentions that sharp techniques should be learned from ASKING and professional traders.
Since I started trading, I have been committed to optimizing trading models. After more than ten years, I was fortunate to have an epiphany. The nature of gaming is a dynamic process where one constantly seeks the most optimal strategy.
The principles of living off trading can integrate the principles of the stock market and apply them in practice; this is not achieved overnight.
1. The core idea of my theoretical system is based on interpreting market sentiment to compare risks and returns, guiding actual operations, hence tentatively named 'mind method'.
2. Experts buy leading stocks, super experts sell leading stocks.
3. When others are greedy, I am greedier; when others are fearful, I am more fearful.
4. Dare to stay in cash during low market positions, and dare to hold full positions during high market positions. With no top or bottom in mind, operations follow the heart.
5. Never stop-loss, never take profit. Only enter and exit. Buy opportunities, sell uncertainties. Exiting means exiting, regardless of stop-loss or take-profit.
6. He who wins the hearts of retail investors wins the world. Where the sentiment goes, so do the bull stocks.
The essence of trading is group competition. To trace its origin, it is about constantly measuring the amount of potential buyers outside the market and their buying inclination, along with the quantity of chips inside the market and their selling inclination. When the former exceeds the latter, buy; when the latter exceeds the former, sell.
The reasoning for buying inclination mostly comes from the profit effect, while the reasoning for selling inclination largely comes from the loss effect. Then, by combining the overall market and mainstream hotspots, one can make instantaneous operational judgments. Operations are instantaneous, while judgments are dynamic.
The essence of stock price movement is a game between cash holders and stock holders. One should ponder the hearts of both sides, positioning oneself on the proactive side.
Brew, initiate, gradually spread; the emotional aspect of chips within the market shifts from limited downside to disappointment leading to exit. This process is also a gradual accumulation of off-market funds. When the moment of market sentiment reversal arrives, funds will flood back in, repeating this cycle.
If there is any law in the stock market, it is this process of emotional transition, which can be predicted. For a thousand years, this law will not change significantly.
On short-term trading
For novice short-term enthusiasts, I would like to pour some cold water. The statistical win rate for pure K-line technical board-hitting is about 45%, and for the simple so-called chasing leading stocks, the win rate is approximately the same, akin to a casino in Macau. Repeating this cycle will only consume your principal.
The operation of buying tickets on the board accounts for about half of my operations. The low statistical win rate only targets purely technical actions, but this method remains one of the effective short-term strategies.
One should have a big picture view, especially when making heavy purchases, to have the judgment that there is still a potential of 3 to 5 limit-up spaces.
Technical patterns are relatively secondary; grasping market sentiment is the key. However, this is hard to quantify without charts but can be interpreted.
Short-term trading requires a strong comprehensive quality, including a calm and rational mindset, a good big picture view, a complete trading system, and some specific operational methods.
Short-term stock trading aims for either hundreds of millions or nothing.
1. Short-term trading is a comprehensive skill. Many spend much time studying techniques, policies, fundamentals, etc., only to find themselves at a loss. The heavens reward diligence, but one should also understand how to use them comprehensively.
2. Those who are good at short-term trading should understand their characteristics and find methods that suit them.
3. When the timing is not ripe or the market is unfavorable to oneself, face risks rationally. When opportunities arise, go all out. This sentence is not difficult to understand but hard to achieve. Many people often rush to recover losses when they lose money, repeatedly resisting risks, yet become numb to the stocks they are deeply stuck in when opportunities arise.
4. When the market's development does not align with one’s judgment, it is necessary to reassess. The more critical the moment, the more calmness is required. A steady mindset is fundamental to short-term trading.
5. Belief; after a long period of confusion, I understand the importance of belief. Self-improvement and resilience.
A good short-term trader's position size typically shows a positive correlation with the overall market trading volume. Trade more when there are many opportunities, and trade less when there are few.
On position and winning probability
The relationship between the position taken and the probability of winning is approximately as follows:
Win rate below 60%, observe
Win rate 60%-70% with small positions
Win rate 70%-80% with medium position
Win rate 80%-90% with large positions
Win rate above 90% with full position
This win rate includes both the win probability and the ratio of price increase to decrease.
For example, when attacking with a full position, I must meet the following two conditions: one is that the win rate must be above 90%, and the other is that the ratio of upward space to downward space must be at least 30%-50% for upward space, while downward space should be within 3%-5%.
Do my best to grasp operations, leaving the winning and losing to probabilities. Regardless of the outcome, face it calmly and manage it rationally.
Buying opportunities, selling risks; only make the right trades. Leave winning and losing to probabilities. Maintain calmness and reduce the obsession with winning and losing.
Establish phased strategies
Many in the market discuss how to overcome greed and fear. While this is good, the focus is limited to oneself, which is inevitably restrictive. Experts strive for calmness when buying and selling, using the market's greed and fear to guide their decisions, with a focus on the overall market, thus achieving a higher realm.
Master the heart of the market, and victory will follow; if the heart is grasped by the market, failure will be relentless.
Calmness at the moment of buying and selling is also an elevation of one's own realm.
Various phenomena may not always be explained, but some exhibit universal regularities, such as the optimal time for left-side trading being a significant collective drop after a period of decline, and being particularly cautious of collective limit up after a series of increases.
Linkage indicates a high level of market capital attention, but the profit effect is the biggest motivation for capital to keep entering.
In strong phases, one can either directly buy strong stocks or buy low-position stocks that have not yet started.
In strong phases, the logic for buying stocks is due to the continuous influx of funds based on the profit effect. Therefore, the probability of strong stocks being chosen by later funds is high, hence selecting strong ones.
During weak phases, the logic of buying stocks is due to the diffusion of the market's loss effect, causing a continuous release of panic selling. Once the release is nearly complete, a small amount of buying can push prices up, hence the strategy of buying at low points.
Learn from history to predict the rise and fall. The stock market is the same; once the past rotation laws of hotspots are mastered, the accuracy of predictions will naturally improve.
It is not about guiding the market, but rather following it more closely. Perhaps some can guide the market, but my model firmly opposes doing so.
I am not fighting alone, because I am within the market, I follow others rather than initiate.
I am fighting alone, in trading; I am the master of my domain.
Value investors believe that the short-term market is uncertain. However, as a short-term player, I believe that short-term market sentiment follows certain rules; the long term is unpredictable, leading to different trading approaches.
It is important to forget your costs. After forgetting costs, consider what you would do if you were currently in cash. If you would still buy the stocks you hold, then hold them. If you would buy other stocks, then switch. If you choose to remain in cash and observe, then sell.
When market hotspots are clear and funds enter the rising segment, being able to grasp hotspots for profit is certainly good. However, trading in the declining segment when hotspots fade and funds retreat is where short-term experts differ from ordinary traders.
Short-term players rarely experience quarterly losses; profitability begins with avoiding losses.
Different stages of a market decline require completely different strategies based on different levels of capital.
In the initial stage of small funds, one can still actively attack during the early stages of decline. As capital increases, the cost of making mistakes also increases. After confirming a decline, one tends to defend.
When the market is weak, naturally, there are fewer opportunities. When the market is strong, the chances of winning above 60% are more frequent, close to daily trading.
Attacking with a heavy position is relatively rare; on average, I do it about ten times a year, including 4-5 times with more than 10% profit, and 1-2 times with over 20%, controlling losses at 10% to 1 time or eliminating them. I haven't specifically tracked it, but it feels roughly this way, reflected on the yield curve as mostly stable upward trends with occasional sharp jumps and very few significant declines.
1. In the presence of profit effects, focus on hotspots. In the presence of panic effects, focus on oversold stocks.
2. Regarding grasping oversold levels from the market's perspective, after a continuous decline, if a large bearish candle appears and the index is far from the 5-day line, from the perspective of sectors, if an oversold sector experiences a collective large sell-off after a continuous decline, when both combine, it signifies the moment to act on the oversold.
3. Judging the overall trend based on the market's profit and panic effects.
4. If the oversold varieties stabilize, the strong stocks will have bigger opportunities; if the oversold varieties continue to hit new lows, the strong stocks are about to catch up.
What is the profit effect
I am involved in short-term trading. The profit effect I refer to primarily focuses on the short term, described as follows:
1. There are many short-term players in this market; many people actually do not understand the market well, yet they can still make money during certain phases. This kind of profitable period increases confidence and leads to quick investments in the next variety. When such behavior creates a group effect, it becomes easier for hot spots to have continuity.
2. Conversely, if those chasing short-term gains repeatedly fail, leading to significant capital drawdowns, they will enter a period of reflection and reduce operations. When this behavior produces a group effect, some strong stocks may lack successors and easily form a corrective decline.
3. The two psychological change processes constantly cycle and repeat. By accurately timing the rhythm, one can discern the size of opportunities and subsequently determine the position for entry and exit.
Knowing oneself and the opponent leads to victory in every battle. Trading volume return is part of stock market information and aids in psychological analysis. When you have enough understanding of your opponent’s psychology, it becomes easier to take the initiative in operations.
The so-called leading theory is not actually scientific. Although many short-term traders firmly believe in it, this is also the source of long-term confusion and an inability to obtain stable profits.
In my view, there are no eternally leading stocks. While buying leading stocks is one method, figuring out how to sell them is a higher realm.
Sometimes buying leading stocks is not due to boldness, but based on the overall momentum of the sector. When the price of a leading stock has not yet reflected its respective premium, I will intervene. Sometimes, buying along with the trend is not due to timidity, but because the leading stock has a strong profit effect, while some following stocks are still at low positions and have upward potential triggered by the leading stock (professional traders are adept at this).
On the overall market situation
I have a classification regarding mainstream, tributary, and secondary mainstream, which should belong to the big picture category.
Regarding hotspots, there are long-term mainstreams and short-term tributaries. Long-term mainstreams can be sustained and repeatedly acted upon, while short-term tributaries have strong explosive power and are also operable.
Expectations are also a dynamic changing process, combining them with the overall market situation.
Stop-loss; if you do not see potential, just sell, regardless of whether it is a stop-loss.
Because it is simple, it is decisive; the worst is to hesitate just because a few points are stuck, without having a clear view.
I prefer to view the synergy from a broader perspective. The movement of individual stocks has uncertainty, making it difficult to make judgments; viewing the entire sector together makes it easier to understand.
This situation is a composite factor, a resonance formed when policy, technical, fundamental, capital, and market sentiment converge.
The big picture falls under the category of the Dao. Strive to cultivate the ability to view the entire market from a higher perspective.
What matters is not what you missed out on but what you should seize at this moment.
In stock trading, a common misconception is that following big players provides a winning edge. But, who are the big players following? Individuals like Asking, whose stock selection approach is that of a public darling, represent the essence of short-term trading.
Everyone has their own first stock in mind, but the true first stock is always determined by the market itself, which is constantly changing dynamically.
Our operations aim to keep our chips in a relatively favorable direction amidst this dynamic changing process.
Confusion itself is also part of market sentiment. Find ways to step outside of your emotions and observe market sentiment from a higher perspective. You will find that these emotional changes are part of the law, just like historical cycles.
I personally feel that stock trading should have a big picture view, examining the market from a higher perspective and choosing stocks with opportunities greater than risks to operate, rather than being fixated on stop-loss and take-profit. If you see a good buy, do not look to sell or switch stocks; the simpler the operation, the better.
Mindset and emotions
Regarding mindset issues, I can only say that emotions are emotions, and operations are operations. Realizing profits and fearing losses are human nature, but as a professional investor, one must overcome these. Whether anxious or fearful, one should operate as one should. If emotions influence operations, then it should not happen. Among the two you mentioned, I think the biggest taboo is rushing to recover losses after losing money, leading to random operations, which can easily result in worse consequences.
Regarding price investing and short-term trading
I initially started with short-term trading, then got into value investing, and later returned to short-term trading. This is not to oppose other methods but to emphasize that our current market is more suitable for short-term trading.
In a continuous low period of four to five years, I mostly focused on learning. Early on, I had the fortune to meet Tang Nengtong and Tong Muye at a brokerage, practiced short-term trading, but repeatedly failed to grasp it. Later, I extensively studied Buffett, including later Peter Lynch, solidifying my value investing route. I was fortunate to come across Minfa and became aware of the magical experiences of Asking and others.
Being obsessed with value investing at high index levels, buying more as the price drops, ultimately leads to heavy losses.
In the early stages of short-term trading, I was obsessed with techniques, often buying stocks that broke new highs, only to make a small profit and then suffer significant losses from a few false breakouts.
Break free from the shackles of dogmatism; practice is the only standard to test truth. Reflect more on the commonalities of your successful instances and the failures, and in successful examples, think about whether you could have acted earlier, rather than waiting for a breakthrough.
Although buying on a breakout is also a good method, it is still at the stage of reacting to moves. If you can see a bigger picture, you should pursue the state of being proactive rather than reactive.
After quitting my job, I faced the great bear market of 2008. With old family members above and young children below, my stock market funds were constantly shrinking, while I also had to withdraw living expenses from the market. Psychologically burdened, my faith was challenged. The strength of role models like Asking and traders inspired me to persist. I made it through, and I hope to provide faith to those experiencing the same.
Having gone through confusion and pain, bearing the pressures of life, it is belief that has brought me to today, which is why I value these two words highly.
With an open and grateful heart, continuously study with scientific methods, your opportunities will exceed those of others.
Technical aspects have been mostly articulated by Asking and traders. What I can repeatedly emphasize is the word 'belief'.
The conceptual aspects simply involve grasping market hotspots; in actual operations, it involves predicting, trial and error, confirming, and increasing positions.
Just earn the part you should earn; there's no need to be overly rigid.
When everything is ready, it is only when the wind blows that action can commence.
Some people need an alarm clock in the morning, while others do not because it has become a habit. My understanding is that the distinction between value investing and short-term speculation lies only in the time frame of operations and the understanding of value.
I have transitioned from short-term K-line techniques to Buffett's value investing, then to trend shorting, then to Chinese-style value investing, and finally to a comprehensive short-term style that merges value and speculation.
I am grateful to Asking and traders; after researching value investing for ten years, I finally understood that this is how the Chinese stock market should be traded. Otherwise, I might still be in confusion.
Domestic A-share investors, if they have high goals, the best strategy is to quickly grow into short-term experts, then accumulate wealth over about ten years.
Short-term speculators have high efficiency in the initial stage. Experts can turn 100,000 into millions within 10 years, but in the later stages, the scale of capital significantly affects returns. Beyond a billion, if one does not transform in time, the yield will significantly stagnate.
I should be grateful and fortunate to have been born in this country and time. Indeed, in the foreseeable ten years, short-term trading will still yield returns; as the market matures, opportunities will gradually decline.
Quantitative techniques
Operations should be simplified; overthinking can lead to hesitation during trades. Don't have heavy cost barriers. Trade more, think more; probabilities will tell you what to do next. If you cannot overcome psychological barriers, no amount of failure can be converted into experience.
I don't pay much attention to specific technical details. The big direction issue might just be what Asking refers to as a piece of paper; once you understand it, you understand it. If you don't, saying more is useless. In my words, although I am doing short-term trades, I am looking at a bigger picture.
A bigger picture simply means that when a stock is bought at 10 yuan, one should be looking at 15 or 20 yuan or even higher. In actual operations, one might take profits after earning three to five points or cut losses. I don't pay much attention to specific technical details.
Low trading volume does not support blue chip trends, but it can create local hotspots. Whether it is a one-day event depends on the nature of the situation.
Watching my real-time trading won't help you much because you won't know what I was thinking at that moment.
When the time has not come, even if you have seen all the real-time trading, you cannot comprehend it. When the time has come, just a few words will convey everything.
In short-term trading, judging hotspots is the most important, and the key is whether there is a profit effect.
Broadly speaking, it involves comprehensive quality; one should know a little about everything. However, in practice, what becomes important is that at that stage, technical analysis and fundamentals are no longer significant. At that stage, just a glance at the K-line could determine the operation.
I used to not believe that Asking was a billionaire until I grasped his words and had a sudden realization, regretting seeing it too late.
After breaking through 2 million in real trading;
1. I am very happy that my account participating in the real trading competition has reached the 2 million mark. Since I started professional trading two years ago, deducting living expenses, this 2 million has all been earned from the stock market.
2. I am very grateful to professional traders and short-term experts such as Asking. From Minfa to Taoguba, I have been quietly observing and constantly learning from the seniors. However, what I have gained the most from them is the belief in short-term trading. With belief, one can fully commit.
3. Regarding experience and skills, to be honest, I feel quite ashamed. Although I've been trading for over ten years, the first ten years were mostly spent in confusion and bewilderment. Therefore, my experiences are not as turbulent as those of Xin Ru Zhi. With belief, after becoming a professional trader, I fully immersed myself in the study of short-term operations, leading to a gradual understanding process. I learned from the techniques of successful traders in Minfa and Taoguba, gathering the strengths of many.
Sometimes it feels like dreaming; is the secret to making money in the stock market really like this? If it's a dream, I still want to continue because the goal is still far.
Pursuing technical quantification once consumed a lot of my time, and many people are still obsessed with it. If stock trading were feasible this way, fund managers should have an advantage over traders.
Apart from trading volume, I hardly look at any indicators.
Trading volume primarily depends on changes in trading volume.
Chasing boards mainly depends on the market environment and hotspots.
Combine trading volume with price changes to gauge the shifts in sentiment both inside and outside the market.
Knowing oneself and the opponent leads to victory in every battle. Trading volume return is part of stock market information, aiding in psychological analysis. When you have enough understanding of your opponent’s psychology, it becomes easier to grasp the initiative in operations.
Judging daily highs and lows is not my strong suit. Even Asking, traders, Just999, and other real traders have suffered losses in stock index futures, indicating that even if one cannot judge daily highs and lows, one can still use the stock market as an ATM.
In a weak market, one must be firm in the belief of short-term trading.
The most important indicator of a professional player is the stability of profitability.
How to do T
I will do T, but I don't do it for the sake of doing it. The process of increasing and decreasing positions is based on my reassessment of risk benefits after market changes. Perhaps this has led me to miss many big stocks, but it has also helped me avoid many risks.
Doing T is itself part of buying and selling operations. It is simply about buying when opportunities are abundant and selling when risks are high. When this situation happens in the same day for the same stock, it becomes what is known as doing T; do not do it just for the sake of doing T.
I am involved in short-term trading now, having given up many fragmented operations. In stock selection, it should either be the current hot stocks or those expected to become popular.
The uncertainty in swings is significant; ultra-short is relatively certain.
Losing money is not the fault of short-term trading. When you first start learning, lacking skill and paying some tuition is expected. The most frightening thing is losing faith.
To be a perpetual winner, one must learn a comprehensive system. I cannot predict whether the market will rise or fall tomorrow, but good operations can ensure that if the market rises, my stocks soar, and if the market falls, my stocks either do not fall or only fall slightly, repeatedly accruing small victories into big wins.
Sometimes whether it is a win or a loss is not important. What matters is making the right decision; leave the win/loss to probability.
Use a fresh perspective to examine this market rather than being fixated on the stocks you are stuck in.
On risk control
Controlling drawdowns is critical to avoiding systemic collapse risks. In fact, most collapses have precursors. By analyzing the evolution of profit and loss effects, one can make inferences, but this may lead to missing many opportunities.
Look at the weather. If you feel it’s going to rain, head home early and don’t be greedy. If the weather is fine, come out again. Simply put, it’s like that.
Regarding issues like averaging down and stop-loss, my answer is that if you still have thoughts about averaging down or stopping losses, it indicates that your psychology still has the barrier of cost. Good operations should be the simplest, either buying or selling.
Personally, despite constantly controlling risk, there are inevitably times when I have heavy losses. It is natural for emotions to fluctuate at such times; my method is to ask myself, what would I do if I were in cash right now?
1. If I were in cash, I wouldn't buy anything; then I would sell the stocks I hold.
2. If I were in cash, I would buy other stocks; then I would switch.
3. If I were in cash, I would still buy the stocks I hold, then I shouldn't sell them.
Of course, the above issues are only directional. There are also quantitative requirements. For example, if remaining in cash means only considering a small amount to buy the stocks you hold, then if you are currently heavily invested, you should at least reduce your position.
The most difficult part is the first million; over a decade of confusion and exploration. If someone had posted similar content a few years earlier to strengthen my belief, I should have progressed further by now. Unfortunately, time cannot flow backward, and much of my experience comes from losses.
The current short-term situation
The current short-term stock market is akin to the 1980s' sea trade. At that time, many were indecisive about venturing into the sea, resulting in many becoming millionaires, but some could also drown. Whether one can succeed depends on many factors.
I believe that professional trading now faces similar problems. Many will certainly achieve millions or billions, but failure is also possible. Whether one can succeed depends on many factors. For me, deciding to resign at that time was quite risky because from today's perspective, it was like jumping into the water without having learned to swim. But through repeated learning in the process of struggling, I learned some methods that suited me.
1. For beginners, there are no shortcuts. Only through experience can one understand, at least by fully experiencing a round of bull and bear markets, preferably two rounds or more, and then summarize and deduce independently.
2. For individual stocks, one should not be fixated on the stocks held but should observe the trends of various sectors to the greatest extent, paying close attention to the leading stocks in each cycle.
3. Regarding operations, do not blindly pursue individual technical indicators or short-term so-called capital flows in and out, or the main force operators.
4. Regarding the market, do not overly rely on predicting specific points for tops and bottoms; focus more on what is rising and what is falling, and how those that previously rose or fell are behaving now.
5. The big picture is a sense; sometimes it may not be understood, but try to let yourself stand at a higher vantage point to view the entire market. Once understood, the benefits will be immense.
This is a gamble. No one can tell you whether you will succeed; it all depends on whether you think it is worth it.