Do you think trading is about buying low and selling high? This is just the surface of trading behavior; the deeper essence of trading is: an endless game of 'searching for and validating the truth.'
The market is like the sea, full of strange waves. Countless people dive in; some return with bounty, while more are defeated. The root cause lies in whether one deeply understands the core essence of trading—it is not merely buying and selling, but a harsh and captivating game of 'searching for and validating the truth.'
In this game, cognition is a weapon, the market is the referee, and 'rewards' and 'punishments' are distinctly defined.
1. Deconstructing the game: Searching, validating, and the 'truth.'
1. 'Searching': Exploring the unknown amidst chaos.
What is being sought is the 'truth' of the market in the current environment—not an absolute truth, but the real logic of price movements, dominant emotions, core driving forces, the effectiveness of key positions, and the totality of the intentions of 'smart money.'
The truth is deeply hidden beneath price fluctuations, information noise, and collective emotions. It requires traders to utilize technical analysis, fundamental research, quantitative tools, and market intuition to sift through vast oceans of data, looking for possible patterns and clues.
This is an active, continuous, never-ending exploration process. The market environment changes rapidly; yesterday's 'truth' may become tomorrow's trap.
2. 'Validation': Testing hypotheses with reality.
This is a key part of the game! Any market cognition (the 'truth' hypothesis) derived from 'searching' must undergo rigorous practical testing.
Test strategy logic against historical data to seek statistical advantages.
Validate execution and psychological reactions in a low-risk environment.
Small position real trading: Test the effectiveness of cognition under real market pressure.
The outcome of each trade: Profit is the market's immediate reward for 'cognitive alignment with reality'; loss is a severe punishment for 'cognitive deviation or error.'
Validation is the only bridge connecting 'ideas' and 'reality.' Without validation, 'searching' is just empty talk, a castle in the air.
Local, temporary, probabilistic advantages.
Non-absoluteness: The 'truth' in trading is by no means an eternal law. It manifests as a statistically significant probabilistic advantage under specific time frames, market conditions, and participant structures.
Economic cycles, policy shifts, sudden events, and changes in participant structures will render old 'truths' invalid, forcing traders to re-'search' and 'validate.'
The essence of 'truth' is positive expected value—strategies that have been thoroughly validated, when executed repeatedly over the long term, have an expected profit greater than the expected loss. It does not guarantee victory every time, but it ensures a probabilistic advantage.
Rules, competition, and psychological battlegrounds.
The market has its underlying logic (supply and demand, human nature, information reflection, etc.) and explicit rules (trading mechanisms, contract details). Understanding and respecting the rules is your ticket to entry.
Competitiveness (zero-sum/negative-sum): Trading is a brutal game. The losses of the majority create profits for the minority (after costs, it is a negative sum). Your cognitive depth and execution ability directly determine your position in the food chain.
The ultimate psychological challenge: The highest difficulty of the game lies in combating one's human weaknesses—greed drives chasing highs and cutting losses, fear leads to premature exits, arrogance refuses to admit mistakes, and hope paralyzes stop-losses. The process of 'searching for and validating the truth' is essentially a continuous process of recognizing and taming the inner beast.
Uncertainty: Like all high-strategy games, randomness and uncertainty are inherent properties. Even with the best strategy, risk management is needed to withstand 'bad luck.'
Deadly traps: 'Believe when the truth cannot be found.'
The most dangerous moments in the game often occur when 'searching' yields no results and 'validation' is missing. Human nature instinctively drives us to fill cognitive gaps, seeking comfort in certainty. 'Believe when the truth cannot be found'—this is precisely the root cause of most losses.
The illusion of 'belief':
Believing in rumors and authoritative prophecies (unverified 'insider' or 'expert' opinions).
Believing that past successful patterns will always work (like carving a boat to seek a sword, ignoring market evolution).
Believing in absolute signals from technical indicators (golden crosses must rise? death crosses must fall? superstitions detached from context).
Believing in your intuition or strong emotions ('I feel it will rise/fall') is often a disguise for greed or fear.
Believing 'this time is different' (forcibly rationalizing illogical movements).
The cost of 'belief': Trading decisions based on 'belief' rather than 'validation' are essentially wishful gambling. The cold market referee will not hesitate to impose 'punishment'—loss of capital. This punishment targets not only errors but also cognitive laziness and avoidance.
3. The way of winners: How to play this game of 'searching for and validating the truth' well.
Understanding the essence of the game is the first step; becoming a winner requires a systematic action framework:
1. Embrace uncertainty, pursue probabilistic advantages:
Completely abandon the fantasy of seeking the 'holy grail' and 'sure-win secrets.'
Focus on: Continuously building and optimizing trading strategies with positive expected value (probabilistic advantage) through rigorous 'searching' and 'validation.'
Accepting a single loss is an inevitable part of the game as long as the system has a long-term positive expected value.
2. Establish a closed-loop system of 'search-validate-iterate':
In-depth searching: Formulate market hypotheses based on clear logic (technical, fundamental, quantitative, behavioral finance).
Strict validation:
Strategy: Historical backtesting + thorough simulation + small account real-world testing.
Single trade: Clearly define entry conditions (based on what 'truth' hypothesis), exit conditions (profit targets, stop-loss levels), and position size. Each trade is a validation of the current hypothesis.
Ruthless iteration: Objectively assess hypotheses and strategies based on validation results (trading records, performance statistics). If effective, persist and optimize; if ineffective, correct or even completely abandon. Let market feedback drive cognitive evolution.
3. Embed risk management into your bones:
This is your lifeline to remain in the game when 'validation' goes wrong and 'punishment' arrives.
Core principle: The risk of a single trade should be controllable (e.g., no more than 1-2% of total capital), and total position should match market volatility.
Stop-loss is part of validation: A stop-loss does not signify failure; it proves that your initial 'truth' hypothesis was not confirmed by the market in this validation. It is a rational act of respecting rules and protecting capital.
4. Forge a 'counter-human' trading mindset:
Cognitive humility: The market always knows more than you do. Verified 'truths' may also become invalid. Maintain an open and learning mindset.
Extreme objectivity: Establish rules and use systems (trading plans, checklists) to replace emotional decision-making. Reduce the space for 'belief.'
Process-oriented: Focus on the depth of 'searching' and the rigor of 'validation.' Profit is the natural result of a correct process.
Patience and discipline: When 'truth cannot be found,' the best object of 'belief' is 'waiting.' Maintaining a cash position is your legal right granted by the game.
5. Continuous evolution: The dynamic nature of game rules.
Market environments, participants, and tools are constantly changing. Winners never settle for existing 'truths.'
Continuously learn new knowledge and methods, and pay attention to changes in market structure.
Regularly review and re-'validate' the effectiveness of existing strategies.
'Trading is a game of searching for and validating the truth'—this is not a romanticized description, but the most precise insight into its essence.
It reveals that:
The source of profit: It is a profound understanding and effective capture of 'local/temporary truths' in the market, which is the 'reward' given by the market after 'cognitive alignment with reality.'
The essence of loss: It is a misreading of market reality, a neglect of the validation process, or yielding to the human weakness of 'believing when the truth cannot be found,' leading to 'punishment.'
In this game, true winners are not those who never make mistakes, but those who deeply understand the game rules (uncertainty, probability, risk), establish and faithfully execute a positive expected value system based on the 'search-validate-iterate' cycle, and possess the iron mentality to decisively stop losses when cognition misaligns with reality, and patiently wait when the truth is blurred.
The highest reward of the game is not just the growth of the account, but the continuous expansion of cognitive boundaries and the enhancement of the ability to navigate risk and make rational decisions amidst uncertainty—this itself is a worthy investment, an ultimate cultivation of wisdom and character.
Are you ready to engage in this game of 'searching for and validating the truth' more professionally and with greater self-discipline?