Do you think trading is 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 verifying the truth.'
The market is like the sea, waves are unpredictable. Countless people dive in; some return with full loads, while more leave empty-handed. The root cause lies in whether they deeply understand the core essence of trading, which is not simple buying and selling but a brutal and fascinating game of 'searching for and verifying the truth.'
In this game, cognition is a weapon, the market is the judge, and 'rewards' and 'punishments' are clearly delineated.
1. Breaking down the game: searching, verifying, and 'truth'
1. 'Search': Exploring the unknown in chaos
What is being searched for is the 'truth' of the market under the current environment—not an absolute truth, but the real logic of price movement, dominant emotions, core driving forces, the effectiveness of key positions, and the sum of 'smart money' intentions.
The truth is hidden beneath price fluctuations, information noise, and collective emotions. It requires traders to use technical analysis, fundamental research, quantitative tools, and market intuition to sift through the vast ocean of data to find possible patterns and clues.
This is an active, continuous, and never-ending exploration process. The market environment changes rapidly, and yesterday's 'truth' may become tomorrow's trap.
2. 'Verification': Testing hypotheses with reality
This is a key link in the game! Any market cognition derived from 'search' ('truth' hypothesis) must undergo rigorous practical verification.
Test strategy logic against historical data to find statistical advantages.
Verify execution capability and psychological response in a low-risk environment.
Small position real trading: testing the effectiveness of cognition under real market pressure.
The result of each trade: Profit is the market's immediate reward for 'cognition matching reality'; loss is the severe punishment for 'cognitive deviation or error.'
Verification is the only bridge connecting 'ideas' and 'reality.' Without verification, 'search' is mere rhetoric, 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 statistically significant probabilistic advantages under specific time frames, market conditions, and participant structures.
Economic cycles, policy shifts, sudden events, and changes in participant structures can render old 'truths' ineffective, forcing traders to re-'search' and 'verify.'
The essence of 'truth' is positive expected value—strategies that have been thoroughly validated, when executed repeatedly over the long term, have an expectation of profit greater than that of loss. It does not guarantee victory every time but ensures a probabilistic advantage.
Rules, competition, and psychological battlefield
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 most people enable the profits of a few (negative sum after costs). Your depth of cognition and execution ability directly determine your position in the food chain.
Ultimate psychological challenge: The highest difficulty of the game lies in countering one's own human weaknesses—greed drives chasing and killing, fear leads to premature exits, arrogance refuses to admit mistakes, hope paralyzes stop losses. The process of 'searching for and verifying the truth' is essentially also a process of continuously recognizing and taming the inner beast.
Uncertainty: Like all highly strategic games, randomness and uncertainty are inherent attributes. Even with the best strategy, risk management is needed to withstand 'bad luck.'
Deadly trap: 'believing when you can't find the truth'
The most dangerous part of the game often occurs when 'search' yields no results and 'verification' is lacking. Human nature instinctively drives us to fill cognitive gaps, seeking certainty and comfort. 'Believing when you can't find the truth'—this is precisely the root of most losses.
'The illusion of belief':
Believing in rumors and authoritative predictions (unverified 'insider' or 'expert' opinions).
Believing that past successful patterns will always be effective (searching for a sword on a boat, ignoring market evolution).
Believing in absolute signals from technical indicators (golden cross must rise? death cross must fall? superstitions detached from context).
Trusting your intuition or strong emotions ('I feel it’s going to rise/fall'), which often disguise greed or fear.
Believing 'this time will be different' (forcibly concocting reasons for illogical trends).
The cost of 'belief': Trading decisions based on 'belief' rather than 'verification' are essentially wishful gambling. The market, a cold judge, will not hesitate to impose 'punishment'—loss of capital. This punishment targets not just errors but also cognitive laziness and avoidance.
3. The path of the winner: How to play the 'search for truth' game well
Understanding the essence of the game is the first step; becoming a winner requires a systematic action framework:
1. Embrace uncertainty, pursue probabilistic advantage:
Completely abandon the fantasy of finding the 'holy grail' and 'sure-win secret.'
Focus your goals on: continuously building and optimizing trading strategies with positive expected value (probabilistic advantage) through rigorous 'search' and 'verification.'
Accepting single losses as 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-verify-iterate':
Deep searching: Formulating market hypotheses based on clear logic (technical, fundamental, quantitative, behavioral finance).
Strict verification:
Strategy: Historical backtesting + thorough simulation + small position real trading verification.
Single trade: Clearly define entry conditions (based on what 'truth' hypothesis), exit conditions (profit target, stop loss), and position size. Each trade is a verification of the current hypothesis.
Relentless iteration: objectively assessing hypotheses and strategies based on verification 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 stay in the game when 'verification' goes wrong and 'punishment' descends.
Core principle: The risk of a single trade should be controllable (e.g., not exceeding 1-2% of total capital), and total positions should match market volatility.
Cutting losses is part of verification: cutting losses does not mean admitting failure, but proving that your initial 'truth' hypothesis has not been confirmed by the market in this verification; it is a rational act of respecting rules and protecting capital.
4. Forge a 'counter-human' trading mindset:
Cognitive humility: The market knows much more than you do. Verified 'truths' may also become ineffective. Maintain an open and learning mindset.
Extreme objectivity: Establish rules, using systems (trading plans, checklists) to replace emotional decision-making. Reduce the space for 'belief.'
Process-oriented: *Focus on the depth of 'search' and the rigor of 'verification.' Profit is the natural result of a correct process.
Patience and discipline: When 'the truth cannot be found,' the best object of 'belief' is 'waiting.' Remaining in cash and observing is your legitimate right in the game.
5. Continuous evolution: the dynamism of game rules
Market environments, participants, and tools are constantly changing. Winners are never satisfied with existing 'truths.'
Continuously learn new knowledge and methods, and pay attention to changes in market structures.
Regularly review and re-'verify' the effectiveness of existing strategies.
'Trading is a game of searching for and verifying the truth'—this is not a romanticized description but the most accurate insight into its essence.
It reveals that:
The source of profit: Deep understanding and effective capture of the 'local/temporary truths' of the market, rewarded by the market for 'cognition matching reality.'
The essence of loss: Misreading market reality, neglecting the verification process, or succumbing to the human weakness of 'believing when you can't find' leading to 'punishment.'
In this game, the real 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-verify-iterate' cycle, and possess the iron mentality to decisively cut losses when cognition misaligns with reality and to patiently wait when the truth is unclear.
The highest reward of the game is not only the growth of your account but also the continuous expansion of cognitive boundaries and the enhancement of your ability to manage risk and make rational decisions amid uncertainty—this itself is an ultimate cultivation worth investing in, concerning wisdom and character.
Are you ready to engage more professionally and disciplinarily in this game of 'searching for and verifying the truth'?