The first principle of trading!
1. Where is the difficulty in trading?
Trading is difficult, not just technically, but it's even harder to walk this professional path. Trading is essentially a game of strong logic and counter to human nature. Poor logic and weak discipline will inevitably lead to being cannon fodder.
2. Surface understanding vs The essence of trading
The vast majority of people entering the market are confused. They lack insight into the market, and their understanding of trading remains superficial:
The master says: Cut losses short, let profits run → You may only be cutting losses, never letting profits run.
Master: Learn from Jesse Livermore, pyramid scheme → You could lose everything in one go.
The master says: Time is the rose of compound interest → You may fall instead of rise over ten years.
The master says: Go with the trend → You reverse as soon as you intervene.
The master says: To take high odds trades, dare to cut losses, fall in love with stop losses → You might be afraid to even place an order. Do you see? These are reflections of the surface-level understanding of the market by beginner traders—trading lacks roots.
3. What is the essence of trading?
Remove all popular theories and misleading rhetoric: Trading is the process of 'giving and gaining'.
Give up more to gain less → Lose by giving up less to gain more → Win
What is a wise trader? Small sacrifices for big gains. Relying on countless small-cost investments to seek high odds, steadily accumulating wealth and maintaining a good mindset.
Want to make big sacrifices for big gains? Even if you see it right, the psychological pressure is too great to hold on. The fundamental conclusion: Use small costs to seek high odds opportunities, and build a trading system around this point. A good system, under risk control, improves the win rate along the direction of odds.
4. Core ideas of the trading system
Go with the trend, think about several key issues:
STEP1: Distribution of high odds opportunities in trend structures
STEP2: How to acquire chips at low cost (low cost allows for slightly heavier positions)
STEP3: Timing of intervention, points with high win rates
STEP4: Exit mechanism, ensure big wins when winning, small losses when losing
Doing these well requires a large amount of sample statistics and backtesting, even forming a market sense. Opportunity points are fleeting, and strong market sense is supported by extensive training.
5. Execution difficulties
The most paradoxical aspect of trading:
Executing stop losses → Just as you stop, it rebounds, causing psychological regret
Not cutting losses → Lucky to earn back, reinforcing wrong perceptions
Correct concepts do not necessarily lead to profit, and incorrect operations sometimes yield profits instead. The key is to believe in the law of large numbers, believe in probabilities, and believe in the system. Under the law of large numbers, system profitability is inevitable, but the prerequisite is that you have the ability to build the system.
6. The difficulty of human nature
Impatience, fear, greed, anxiety, these are just surface issues.
Acquire chips at low cost + Systematic tempering → Steady even when encountering contrary orders
High costs + Unrefined → A little contrary and it collapses
Therefore, the most important thing in trading is to build and trust your own system;
The hardest part of trading is to continuously execute the system under market tempering without being devoured by human nature.$ETH
