Trading skills are relatively easy to learn; relevant materials can be found online or in trading classes. However, the real test is personal engagement.
Easy mindset and thinking. Next, I will share these 15 trading experiences that have guided me towards the correct trading direction.
These experiences are what I have summarized from actual trading, and they play a crucial role in cultivating the correct trading mindset and way of thinking.
I hope that by sharing these experiences, I can help more novice traders who have just stepped into the trading world or those battling in the market to achieve better trading performance and reduce unnecessary troubles. Be a highly defensive trader.
Becoming a highly defensive trader is a key transformation for novice traders on their trading journey. Many beginners may initially be misled by a desire for quick success; they want to make profits quickly and even approach trading with the mindset of 'getting rich overnight.' However, a more practical and feasible mindset should be: maximize the protection of your funds. These two mindsets cannot coexist; if you only focus on quick profits, your capital is likely to be lost even faster.
A rule from the sports arena also applies to trading: offense is the best defense. In this context, it means only trading under favorable conditions, while protecting capital and staying away from the market at other times. Novices may achieve success in their initial trades by chance, but luck cannot last; you should be wary of the 'novice effect' trap.
Imagine if you were holding a gun; you wouldn't waste bullets unless you were absolutely sure you could hit your target. The same principle applies to trading; conserve your capital strength and only make a 'lethal strike' when a genuinely favorable opportunity arises. Protecting your capital to the maximum extent is key to success in trading. As long as you can effectively control risk, even if you encounter strong entry signals but ultimately fail, the impact on your capital will be kept within a reasonable range.
Frequently checking charts and constantly monitoring trades can often have an adverse impact on trading. In life, too much interference usually does not yield good results. If you are constantly trying to overcontrol your trades, the outcome may backfire, causing you more trouble.
Have you ever unconsciously increased your position or exited a trade early due to excessive focus on charts? In hindsight, did you feel that you acted too impulsively at that moment? Such unplanned behavior is often one of the reasons many people incur losses.
The simplest approach is to set a trading plan and then forget about it. This is a principle I often emphasize to beginners and one of the most valuable experiences I've gained: in trading, the less you interfere with your operations, the better. Simply follow your trading plan and let trading proceed as planned; that is true trading wisdom.
The result of the last trade should not influence the next trade. The result of the last trade should not affect the next trade. This is an extremely important principle, but many people often forget it. They can easily be influenced by the result of the last trade. However, it should be understood that each trade is unique.
Results are randomly distributed. Suppose you have made 100 trades; the gains and losses may be roughly equal. However, their distribution cannot be so uniform. It is possible to have five or ten consecutive losses, and if these losses affect your mindset, then the upcoming profitable opportunities may also be hindered by your emotional state.
It is also important to note that after experiencing profitable trades, excessive confidence can have a negative impact on trading, just like the fear experienced after losing trades. Overconfidence makes one more willing to take on excessive risks, and in the long run, its negative impact can be quite terrifying. Therefore, maintaining calm in trading and not being swayed by short-term trading results is key to maintaining a stable mindset and achieving long-term success.
Simplify trading, and you will gain more.
In trading, moderation is key. A common mistake many traders make is overdoing it. They overanalyze the market, overinterpret market trends, overthink, and overtrade, generally doing a lot of unnecessary things. As a trader, learning to be appropriately 'lazy' is equally important.
First, it is important to clarify that favorable signals in the market are limited and even rare over a period of time. Most of what you see and hear may just be 'market interference', noise that is of no benefit to you. Learn to filter these signals and then identify the truly favorable 'quality signals'; this is the routine step in finding opportunities.
Secondly, I recommend that you learn the mindset of hedge fund traders for your trading. They hold millions or even billions in capital, but they trade with strict principles, like selecting diamonds from sand, only choosing the highest return opportunities. For those 'possible' or 'seemingly' ambiguous signals, I advise you to stay away from them. In my over 20 years of trading experience, the best trades are always the most obvious and intuitive ones.
Have a clear exit plan before entering.
In trading, no one tells you what to do. You must set your own rules, which means you must take responsibility for your actions. Many people lack this self-control, leading to frequent losses of trading direction.
Before trading, one of the most important tasks is to determine the exit plan. It took me several years to realize that exiting is more important than entering. I observed that many people's exits are arbitrary, resulting in either very little profit or substantial losses. Establishing a strict profit-taking and stop-loss plan is the best approach. Such a plan can provide you with clear guidance, allowing you to remain calm and execute the plan regardless of whether you are in profit or loss. This disciplined exit plan helps ensure that you maintain a clear mind in trading and reduce the influence of impulse and emotions on decision-making.
Avoid worthless trading.
In the world of trading, a worthless trade refers to a trade where the risk and profit are disproportionate, usually occurring when traders are in a state of blind and frequent trading. This type of trading often results in losses exceeding profits, negatively affecting the trader's mindset, and even trapping them in a vicious cycle of losses.
Specifically, traders often rush to enter the market upon seeing so-called 'opportunities' without considering the profits and risks of the trades. These impulsive traders usually hold a mentality of luck, believing that even a small profit is still a gain. They ignore the large risks in favor of small profits and perceive every market movement as an opportunity not to be missed, magnifying minor opportunities subjectively and trading impulsively. This attitude not only shows contempt and disrespect for the market but also makes it difficult to achieve good results.
For professional traders, they usually formulate trading plans and set stop-loss levels in advance to ensure that even if they incur losses, the impact will not be too great. However, the losses from worthless trading are different, as these traders have a shallow understanding of the market, make random trading decisions, and lack deep consideration. Such avoidable losses are more harmful than beneficial for traders' growth.
High Discipline
High discipline plays a crucial role in trading in the financial markets. It refers to traders following a series of clear rules and principles when trading to ensure effective risk management, achieve investment goals, and avoid adverse consequences from emotions and arbitrary decisions. The level of discipline directly relates to the success of trading and is considered one of the key factors for successful trading.
I insist on emphasizing that trading decisions should not be influenced by emotions. I only spend half an hour each day checking charts, deliberately avoiding excessive observation.
Market volatility. I advise traders to strictly adhere to their trading plans.
Avoid overanalyzing the market because disciplined execution is the cornerstone of stable profits. By following the predetermined plan, I can remain calm, avoid emotional decision-making, and improve the efficiency and stability of trading.
Most of the time, you should stay away from the trading desk. On the road to trading, a wise strategy is to maintain distance from the market. Overtrading is often a shortcut to losing capital, and remembering this is crucial.
I strongly advocate using larger time frames to examine market trends. This method acts as a natural filter that can eliminate much unnecessary information interference. By doing so, you can focus more on executing your trading plan, thereby ensuring the effective utilization of trading opportunities. In my opinion, the daily chart is the best choice for technical analysis.
Did you sleep soundly last night?
To understand your trading stress levels, the most straightforward method is to conduct a sleep test. If you are taking excessive risks in each trade, then that trade will haunt you like a nightmare, filling your thoughts. When lying in bed, do you often find yourself troubled by worries about trading? Do you wake up in the middle of the night, unable to resist pulling out your computer or phone to check market conditions?
If you find yourself trapped in these emotions, then your trading may have serious problems. Maintaining long-term trading and profitability requires effective risk management. If anxiety has begun to affect your sleep, it means your trading risk has exceeded your tolerance levels.
Timely adjustments to positions and the input for each trade are crucial. Everyone should maintain a cautious attitude towards this.
Before live trading, you need to keep these two points in mind to ensure that your trading does not degenerate into gambling.
First, you must have a clear trading strategy. In live trading, lacking a trading strategy can easily cause you to lose your direction, leading to losses. It is best not to rush into trading until you fully understand your strategy. Remember, do not try to use multiple different trading methods simultaneously, as this will only complicate matters.
Secondly, capital management is crucial. Without sufficient funds, you will not be able to trade in the long term, let alone make a profit. Therefore, it is essential to deeply understand the importance of capital in trading. Do not recklessly waste your funds, as it is your lifeline in trading. Through effective capital management, you can better protect your investments and ensure smooth operations in the market.
How is your self-control? This is important.
The success of trading depends not only on rational strategies, trading plans, and capital management, but also on psychological self-control. The trader's mindset can be said to be the dominant factor in trading rhythm, and successful traders must possess strong self-control.
In trading, the biggest challenge does not come from capital issues, but from fluctuations in personal emotions. A negative mindset can weaken one's ability to respond to good trading opportunities, becoming the biggest trap in trading.
Letting self-emotions fluctuate may lead to a loss of rationality, gradually eroding the clarity of trading decisions. Confidence is key to successful trading, but excessive confidence can become a breeding ground for negative emotions.
In trading, a principled person can better manage themselves and remain calm. Trading does not require excessive individuality; rather, it requires a robust execution plan and consistently rational decision-making. By establishing a solid psychological foundation, traders can better cope with market fluctuations and ensure a more stable and successful trading process.
The more favorable factors, the better. The success of each trade depends on acquiring as many favorable factors as possible, as this will increase the likelihood of profit. In trading charts, if trend lines, important chart levels, and trading signals can remain consistent, then the trade is more likely to be profitable.
Although many traders seek to avoid human errors through automated trading systems, I personally do not like to rely too much on automated trading systems.
I believe that as long as you can find the intersection of trends, water level lines, and signals, you can effectively execute trades without worrying about trade quality. In trading decisions, unity and consistency are key, which can be achieved by effectively integrating various supporting factors.
No averaging down on losses.
In trading, placing too much emphasis on win rates while neglecting risk management is a dangerous mindset. I insist that one should not continue to average down during losses, as this only turns trading into gambling. I believe a successful trader should have risk awareness, avoid taking risks, and not pursue doubling their account in the short term.
Some traders view profits as a secondary goal, focusing more on proving the correctness of their views. However, pursuing a high win rate while neglecting risk management is an extremely dangerous attitude. When trades go wrong and conflict with market trends, some traders not only do not set stop-loss levels.
Instead of closing positions, you keep adding to them, hoping for a market reversal. This behavior causes trading to lose its rationality and resembles gambling. Successful traders should focus more on remaining calm and controlling risks sensibly, rather than being intoxicated by short-term high win rates.
Set reasonable stop-loss levels and strictly implement them.
Ensuring reasonable stop-loss levels and strictly implementing them is a crucial principle in trading. I have always believed that those who do not set stop-loss levels may ultimately face the risk of liquidation. In each order, set a reasonable stop-loss distance, and make wise decisions based on personal circumstances. In addition, I remind traders not to widen stop-loss distances during losses, nor to close positions too early during profits.
For every trade placed, you should set stop-loss and profit targets and stay away from emotional trading. Once set, it is best not to repeatedly check the orders or charts, as such behavior may disturb your emotions. When seeing orders in loss, it may tempt traders to widen their stop-loss distances, leading to greater losses. Conversely, when orders are profitable, closing them too early may cause traders to miss out on more profits. In summary, constantly staring at the market can significantly affect emotions and mindset; the best practice is to set it up and then not interfere too much.
Calmly wait for the best trading opportunity.
If you find it unbearable to endure this torment, waiting for a clear trend to emerge before taking action is also a good choice. The market is never short of opportunities; what is truly lacking is a readiness attitude. In the world of trading, patiently waiting and ensuring your mindset is in the best state is key to achieving success. Do not rush to take action; instead, wait for the right moment, as a clear trend will provide you with a clearer direction.
In trading, the market often produces false signals or weak signals; however, the importance of waiting for the best trading opportunity goes without saying, just like a cheetah waiting for the best prey. For weak signals, we should not take excessive risks but should patiently wait for concrete opportunities. Maintaining patience is crucial because the market is constantly fluctuating, but not every moment is an optimal trading opportunity.
Summary
Finally, I need to emphasize that trading is not everything in life; it is just a form of investment and should not interfere with normal life. Unless you are a professional trader, do not invest all your time in trading; you should have your own job and career.
In summary, successful traders need to adhere to simple and effective trading strategies, maintain high discipline, wait for the best opportunity, set reasonable stop-loss levels, avoid overtrading and taking unnecessary risks, and not forget that there are other aspects of life and career outside of trading. These suggestions can help more people achieve success in the financial markets.
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