Before talking about the trading model, we need to talk about the issue of ocean waves. We all know that there are countless waves in the ocean every day, and there are so-called three-foot waves even when there is no wind. The same is true for market conditions. There are countless small waves every day, which are impossible to count.
The situation of the windless three-foot wave changes too fast and too small, and it is impossible to predict the value of the unpredictable. So the countless market fluctuations every day are the same.
If you watch the weather forecast of CCTV, you will find that the typhoons every year are very accurate, and even the route level can be calculated. It is the same when we trade. We should go for this kind of regular large market level, not three-foot waves.
Let me tell you again why you can’t just wait for a big market with great strength.
If you want to do a good job in trading, you must make a big profit-loss ratio. To do this well, you must lose less and earn more.
When there is no wind and the waves are three feet high, you will get several characteristics
1. When there is no wind and the waves are three feet high, your chances of winning are estimated to be less than half
2. Then earn 10 yuan and lose 8 yuan. The cycle of one loss and one gain continues, and the losses increase in the end.
3. Because the wave is small, it is easy to end, the uptrend is short-lived, and the failure rate of deducing future trends is as high as 80%.
When the waves are huge, you will have several advantages
1. Stop loss when failure occurs, with a limit. When success occurs, the profit from the order keeps rising.
2. After doing this several times in a row, the principal will increase rapidly.
3. When the waves are huge, the market will show an obvious regular rise. At this time, your success rate in deducing future rises will be as high as over 80%.
What is a good trading model? It is actually very simple and is often seen. The simplest one is the resonance rise or fall of multiple levels of moving averages. The larger the level, the larger the space.
1. Look at the following figure, the monthly, weekly and daily moving averages are all rising. This is what we often call a bull market.
2. If there is no trend at the monthly level, but only at the weekly level, then the market trend may last for a few weeks, but it will never last for 2 months, usually at most one month.
3. If there is no trend at the weekly level, but only a trend at the daily level, then the market may last for 1-2 weeks at most.
4.This is the relationship between market levels.