Think before you act or act without thinking

We have a saying called "Think before you act." Mature behavior requires careful thinking in advance.

The difficulty lies in: the time division of thinking and action into different stages and the strict implementation after division.

Most of the mistakes in work, life and trading are due to the confusion between the two. Furthermore, it is because they are clearly distinguished and confused unknowingly.

For example, we have identified the idea that rules are more important than analysis, and we have also designed the 30 / 120 trading system (or other trading systems). This is the behavioral stage of thinking, and this behavioral stage must occur outside the trading time period. Once we enter the trading time period, we enter the behavioral stage of the line, that is, the result of executing the previously thought-the trading rules. We can no longer think about whether the trading rules are reasonable during the trading time period. If we have not thought clearly before the transaction, we should not enter the trading time period. Many people do not clearly distinguish between these two different time periods. This is one of the difficulties. I mention it here today and many people will understand it at a glance.

The real difficulty is this: even if you understand the above distinction, you will still unknowingly confuse thinking and doing together in trading.

For example, if you trade with the 30 / 120 trading system, you have done a lot of statistical work outside the trading time period, proving the effectiveness of this trading system with a high probability, and tell yourself with confidence Tomorrow's transaction will follow the instructions of this trading system. However, something went wrong with tomorrow's transaction (or future transactions). The trading behavior changed unknowingly during the day, that is, the operation was not performed 100% according to the instructions of the trading system.

The root cause of such problems is that as long as people are alive, their thinking will not stop. There is no switch in human physiological mechanism that turns thinking on and off.

We know that in order to obtain successful trading results, we must execute the established trading strategy without thinking. This behavior pattern is contrary to human nature.

Therefore, trading itself is not difficult. What is difficult is fighting against human nature. To put it more bluntly, it is to completely cut off the inherent physiological and psychological mechanisms of human nature during the trading period and turn oneself into a machine. Therefore, many people design successful trading systems as automated trading programs.

Automated trading programs can, to a certain extent, help people overcome the problems of human nature in trading. However, automated trading programs must pay attention to a technical issue. Once the task cannot be completed according to the trading system due to problems with the program, circuit, or computer, it will result in varying degrees of losses (sometimes the losses will be huge).

A truly top trader is like a top martial arts master - there are no tricks to win.

They don’t have the standardized trading rules that ordinary people have, but they do have rules. Their rules are in their blood and they don't need the help of programmed trading. When they enter and exit the market, they show a reasonable rule everywhere, which is manifested in the high number of successes and low number of failures; successful orders make huge profits, and failed orders suffer negligible losses.

In trading, if you want to rank traders’ operating levels, my point of view is:

Distinguish according to the presence or absence of rules, in order from low to high

No rules (analysis and prediction) - there are rules - there are more reasonable rules - there are more reasonable rules - there seems to be no trick but there are tricks everywhere.

Distinguish according to the size of the operation cycle (level), in order from low to high

Year - quarter - month - week - day - 60 minutes - 30 minutes - 15 minutes - 5 Minutes - 1 minute - 30 seconds - 15 seconds - 5 seconds - 1 second.

Of course, this division is just a simple division based on the existing trading market system, and it can be divided more detailedly.

When one has the ability to operate a transaction in a relatively small period, once failure occurs, the stop loss is very small. But once you succeed, you will truly achieve "regularly and reasonably buying the bottom and escaping the top."

The market has breakthroughs (up or down) all the time. Giving a trading rule means giving an actionable boundary line.

With such a boundary, you can ignore breakouts that are far away from the boundary (treating them as market noise for the time being). This simplifies the complex and changeable up and down market and improves the success rate (that is, the failure rate is relatively reduced).

Everything is relative, and the above theoretical basis is for people who have no rules. So I said,

The 30 / 120 trading system is just an entry-level trading system, and it contains a lot of room for improvement. When we operate the 30 / 120 trading system, we will find that for those markets with low volatility, its rate of return is not high, and sometimes it seems to be a good profit. However, if this rule is strictly followed, a lot of book profits will be wiped out. . There are also some situations where the market changes from profit to loss. But even so, the rate of return of the 30/120 trading system is already very good.

You may say that the market trend is regular. Sometimes it makes a new high/new low and then pulls back immediately (that is a failed breakthrough). You said it has no rules, and sometimes a strong continuous market (commonly known as a trend or unilateral market) is formed after innovation. The seemingly chaotic up and down market, after a period of time, you can draw an ascending (declining) channel, which seems to be a rule, but at the beginning you cannot draw such a channel, which seems to be irregular. When a person cannot understand the disorder contained within these orderly conditions, and the orderly market conditions contained within the disorder, one can only call these market conditions "market noise." Whether it is market noise or not depends on a person's understanding of the market, and a person's understanding of the market "varies from person to person."

Many trend following traders say that their profits come from a small number of "let profits run" operations, or from a small number of large fluctuations in the market, or from a small number of large-level trends. When they say this, they do not mean that most of their operations usually result in losses. But most of the time, when the operation is profitable, the loss in the consolidation area will soon be filled, and there will be no profit if the two offset it.

So, is there a trading system that can allow profits to run and cut off losses? It can adapt to both unilateral market conditions and consolidation market conditions (that is, you can still make money in the consolidation area) Woolen cloth?

The answer is yes.

The answer lies in this article.

Many people’s thinking direction is to design two sets of response plans, one to deal with unilateral market conditions and the other to deal with consolidation market conditions. Such an idea, if you don't think about it, will feel very reasonable. But you don't know in advance that the unilateral market has turned into a consolidation market. By the time you see it, it's already too late. Therefore, this kind of thinking reappears in the minds of one generation after another. In the more than 100 years since the emergence of technical analysis, no so-called trading master has solved such a problem perfectly.

To solve this problem, you must use a method (a system) to solve it.

Today I will mainly talk about the psychological issues of operation during the trading period. By the way, I will also talk about the trading rules to give some people some advanced thinking or inspiration. Some people may not understand what I'm talking about at all. If you really don't understand what I'm talking about, don't waste your time trying to figure it out. Everything will fall into place naturally. When you reach a certain period of time or state, you will naturally understand it.