🔶Beginners' 'sweet trap' and 'get-rich illusion'

Newcomers to the financial market often go through a 'honeymoon period' or 'beginner's luck'. The reasons that attract them to enter are usually coinciding with the rise of certain trending assets, such as Bitcoin or new energy stocks in recent years. After entering, they might make money from an accidental trade and mistakenly believe they have mastered the secret to wealth. Various social media stories of 'doubling in a week' or 'beginners earning millions by luck' further exacerbate this illusion.

🔶Overconfidence is the 'deadly poison'

There is a saying in psychology called the 'Dunning-Kruger effect': the less capable a person is, the more likely they are to overestimate themselves.

When beginners make a few small profits through luck, they become overconfident, their brains secrete dopamine, and they start to feel ecstatic, mistakenly believing that 'I have found the pattern.' They begin to increase their positions, trade frequently, and even borrow to leverage, but the market has cycles; the methods you use to make money will lose effectiveness once the cycle ends, and many people who just increased their investment will face significant losses, even halving their principal.

Some people refer to this phenomenon as the 'lifecycle of retail investors'—first being fed sugar by the market, then being uprooted.

🔶Initial 'losses' can actually be a good thing

The financial market is never short of 'get-rich-quick myths', but they only belong to a very few survivors.

Nobel laureate Daniel Kahneman proposed the 'availability heuristic'—people are more likely to remember vivid success stories while ignoring the commonality of failure.

For example, in the A-share market, many old investors vividly remember the surge in 2015, but then there were consecutive four years of declines. Similarly, after the bull market from 2020 to 2021, there were four consecutive years of declines. Looking at the past ten years of A-shares, years of failure and loss are common, with only two years of successful gains.

For example, in the cryptocurrency market, Dogecoin surged 15,000% in 2021, allowing countless people to 'lie down and earn', but few mention that 99% of those who chased the price at its peak ultimately lost everything, and after a year of decline, it took three more years of consolidation without significant gains. Similarly, in commodity futures, Lin Guangmao became famous for cotton in 2011, turning hundreds of thousands into 2 billion! After becoming a wealth creation myth in the futures circle, countless people tried to imitate him, but in the following 14 years, cotton never saw another surge like that year. During these 14 years, almost all who learned from him to hold firm positions and increase their investment ended up losing everything!

In summary, many profitable market conditions come from years of waiting, and after a major market event, it may take years or even over a decade to see another major event. Those who initially profit by luck often become 'cut leeks' due to blind confidence and overlook the risks.

The financial market is never short of myths, but behind those myths are countless 'silent losers.'

Initial losses are not a curse but the market’s 'get-out-of-jail-free card'—it uses pain to remind you:

Investment is the process of turning knowledge into reality, not a game of luck;

Risk is always more complex than imagined;

Only those who respect the market can live longer.

As Howard Marks of Oak Tree Capital said: 'Great investing does not come from perfect forecasting, but from tolerance for mistakes.' So, the next time you feel frustrated by losses, please smile and tell yourself: This is the universe saving you, making you respect the market so that you can live longer and better in the future!

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Source: YouTube: yuncongtrade I learned trading from what I believe is the most valuable teacher. I am slow-witted and may not be born for trading. I have almost watched all of Teacher Yuncong's teachings. Trading hasn’t made me money but has prevented me from losing even more!