Good question. The core issue for trend traders. We often say that trading is about small losses and big gains. Small losses are easy to manage; as long as you have a strong risk awareness, you can control each loss to a certain percentage of the total amount, like 2%, and determine your position size based on this. Then, every loss cannot cause significant harm. But if you cannot realize big gains, and each trade results in small losses and small gains, in the long run, you will be completely trapped in a bottleneck. Only big gains can help you break through this bottleneck. So, how can you achieve big gains when you see the right opportunity? I think there are four aspects to address.
The first question: Is a fundamental logic issue of high odds. In other words, your order needs to have a certain opportunity to generate a large market movement from the fundamental logic level. From a fundamental perspective, price fluctuations revolve around the value center. The more severely the price deviates from the actual value, the stronger the possibility of market correction and trending, thereby increasing both the win rate and odds. From a technical perspective, price fluctuations are based on energy levels. The greater the energy level, the stronger the released momentum; the smaller the energy level, the weaker the released momentum. If we want profits to run, then the targets we filter must have the potential for a significant main rise. We can only earn 600, 700, or 800 points of profit when we can see a profit of 1000 points. This is a matter of levels, a matter of vision. Small resources should not be used for big tasks. You cannot expect someone with a shallow vision to consider long-term benefits. You cannot expect someone with a low energy level to undertake very important tasks. As the ancients said, teaching according to the material, this is a selection issue; large resources should not be used for small tasks, and small resources should not be used for large tasks. The former is wasteful, while the latter is disastrous. Of course, it doesn’t mean that large resources can definitely accomplish great things; after all, luck is not always favorable for heroes. Cai Hesen is a top talent within our party, but fate was unkind, and he passed away too early. Large resources are a necessary condition for big tasks, but not a sufficient condition. In other words, high energy levels do not always guarantee the release of a corresponding price trend; sometimes, it can be grand and magnificent, while other times it may not manifest, or it may fail midway. If it does not manifest, that’s a stop-loss; if it fails midway, that’s a small gain; if it manifests grandly, that’s a large gain. But no matter what, the targets you filter must have the potential for a significant main rise. If it is merely a trend of low-level energy structures, hoping to let profits run is akin to expecting low-level energy individuals to undertake big tasks; both are imbalanced, and the final result often leads to disappointment. The level of opportunity is inversely proportional to its frequency, similar to the scarcity of large resources among the crowd. When the market offers you significant main rise opportunities, I will seize those. When the market offers you moderate rise opportunities, I will seize those. I will not participate if the opportunity is too small. The structure is self-similar; the trend structure is nested, with only differences in energy levels, not in nature. However, the price trends released by lower energy levels, in my view, have no odds. I have never been willing to gamble on things that have no odds at all. I only pick opportunities that might be a watermelon or an apple, but I won’t even touch opportunities that are sesame. The two most foolish things are: one is clearly a significant main rise opportunity but making short trades back and forth in it; the other is hoping for it to run when it fundamentally lacks underlying factors for big market movements. Therefore, back to your question, profits always run away, and a very important reason for this is whether the target itself contains high odds and high energy level underlying factors. If it lacks even this underlying factor, then what’s the point of running?
The second question: Is about adding positions. This issue is not closely related to your question, but it is an important strategy for making big money and improving the profit and loss ratio, and it is closely related to the first energy level issue I just detailed. So let’s discuss it together. Making money = direction * amplitude * position. Soros said: What matters is not whether the judgment is right or wrong, but how much you make when you are right and how much you lose when you are wrong. How much you make when you are right is related to the amplitude of the level and the total position you hold during that amplitude. What is the core of trading? It is to carry a stop-loss at key positions at low levels and bet on major level reversals and continuations. The key point is: only when there are high energy level main rise opportunities will you consider adding positions, and only high energy level opportunities can potentially have space for market continuation. A large level main rise opportunity usually contains 3 to 4 waves of secondary main push waves and pullback structures. In a large level main rise trend opportunity, each secondary pullback is a good opportunity to add positions. Of course, the longer the market continues, the greater the risk. The same main push and pullback structure in different positions of a large level main rise opportunity will have different ratios of opportunity to risk. I usually add positions at most 2 times, and each time I add, the chips are gradually reduced. This is a later matter; I will elaborate on it when there is an opportunity.
The third question: Is about the type of trend operation. Letting profits run is correct. However, the manner in which the trend runs is vastly different. Some trend types are open and close, moving forward 3 steps, but then needing to pull back 2 steps. Some trend types are very strong and smooth, without significant pullbacks at all. The open and close trends are actually more suitable for swing trading. Such trends of running and pulling back are very uncomfortable, extremely uncomfortable. If its running type is a strong main push wave and weak pullback wave structure, then you must hold firm all the way to the end. This is related to product selection. The same person, with the same trend trading system, may have very different trading results in different products and market conditions. For example, products like soda ash, glass, coke, lithium carbonate, aluminum oxide, and European lines, when their trends unfold, holding positions will be more comfortable. Therefore, try to choose products with historically smooth trend movements and pay more attention to them. For trends that open and close with 3 steps forward and 2 steps back, still choose to swing trade. A large pullback can be very uncomfortable; if you cut your position and then it goes back up again, holding efficiency and mentality under such a trend model can be very torturous.
The fourth question: Is about pattern and mentality. Look big and do small; looking big is about pattern; looking small is about details. Those who make big money have always had beliefs. High energy level opportunities can sometimes be fast at first and slow later, shooting up immediately; sometimes they start slow and then accelerate later. Therefore, one should have more patience towards high energy level opportunities. For secondary pullbacks caused by high energy level opportunities, one should have more tolerance.
If, I mean if you cannot identify and hold onto high energy level orders, always fearing that pullbacks will wipe out all previous profits, then just swing trade. Trade in the direction of the trend, eating one wave after another, completely avoiding pullback segments, regardless of whether the pullback is 3 steps forward and 2 steps back or a weak pullback, you don’t need to care about it. This trading model is also very good. The profits you catch are the real profits. The profit and loss ratio of one wave, due to the shorter amplitude and lack of adding positions, although the profit and loss ratio is not as high as that of trend position models, in terms of holding mentality, it will be more relaxed, without having to endure the agony of pullbacks. Moreover, high energy level opportunities are rare, and in terms of trading frequency, the swing trading system also has an advantage.
Trading models have their pros and cons. It can only be said that it must resonate with oneself. No matter how good someone else's model is, if it doesn’t fit you, you won’t be able to use it well; then it's not worth it. After all, in the end, trading is about trading ourselves. The ultimate trading system is the mirror projection of our cognition, character, and virtues in the market.
I am (Brother Jun Crypto) with 6 years of deep cultivation in the cryptocurrency circle, with proven skills in short-term speculation and mid-to-long-term layout strategy. Accurately capturing the best trading opportunities, providing you with powerful information to empower your investment decisions. Choose the right direction, find the right rhythm; here, you have the professional perspective you need.$BNB
