This is easy to understand. Theoretically, if you can catch a daily limit up every day, the entire earth could be yours in a year; even if you catch a limit up once a week, a capital of 100,000 could grow to over 17 million in a year. In the futures market, due to the T+0 system, you can trade countless times a day, which presents even more astonishing theoretical profit potential.
In reality, there are indeed operations like this — for example, Goldman Sachs' high-energy computer systems, which cost millions of dollars for a single setup, take advantage of almost zero transaction fees and exploit data latency of just a few milliseconds to conduct over 100,000 trades a day, profiting from high-frequency trading.
However, most people remain clear-headed and do not have such unrealistic dreams. Their short-term trading goals are quite simple: earn 3%-5% on stocks in a week, trade futures two or three times a day, making a few hundred or a few thousand with each trade. But this is nearly impossible to achieve in reality.
Short-term fluctuations are completely random, and no one can achieve a 100% win rate. As long as the win rate is below 100%, transaction fees combined with frequent trading will lead to negative expected value. For example, with a capital of 10,000 trading rebar futures, the transaction fees for a round trip are nearly 10, and if you trade ten times a day, the fees will account for about 1% of the capital; even if you break even over a year, the capital will still lose over 200%. For stocks, calculating at a round trip fee of 0.5%, trading twice a week could leave you with only half the capital by the end of the year.
Therefore, without a fee advantage, do not touch short-term trading. Also, learn to control losses, but do not limit profitable trades.
Many people have a misconception, akin to the fantasy of 'making a little progress every day, transforming in a year', which translates to trading as 'earning 1% every day, achieving financial freedom in a year'. This is simply unrealistic — if you can currently jump 1 meter, jumping an additional millimeter every day might get you to 1.2 meters, but you will never be able to jump 2 meters.
Livermore made his fortune several times by capturing major trends and adding to profits; in 2008, some retail investors used 40,000 as capital to trade soybean oil and managed to grow it to over 20 million through adding to profits, but unfortunately, they didn't know when to stop, resulting in a total loss.
People like short-term trading mainly because profits come quickly — selling yields immediate gains, while not selling might lead to a return or even losses. Additionally, some full-time traders resort to short-term trading out of necessity to cover living expenses.
This is why big players prefer long-term trading — not because of their large capital, but because long-term trading is more profitable. When you give up short-term trading, your chances of success increase by over 80% compared to most short-term traders, and you can escape the pain of frequent crashes, truly achieving the freedom you long for: not having to watch the market daily, making money easily, waking up naturally, buying when you want, and playing when you want.
At that time, you might be able to say, 'Aside from eating, I desire nothing; beyond my blanket, everything is foreign.'
I am Yayue, focusing on analysis and teaching, willing to be your mentor and friend on your investment journey. I help you solve confusion and issues with locked positions, providing operational advice and letting my skills speak for themselves.
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