In the approach to algorithmic trading by investors, there are two extreme tendencies: one is to consider algorithmic trading insignificant, believing that the success of trading depends on subjective efforts in market judgment or even luck. The other extreme tendency is to believe that mastering algorithmic trading methods is the most important factor, thinking that with the right trading procedures, one can win decisively.

Both of these methods are biased and may lead investors to make fatal mistakes. Trading technology is like a weapon system on the battlefield. Of course, the more sophisticated the weapon system, the higher the chances of winning. However, victory is the result of a combination of many factors. Therefore, the outcome of victory is not necessarily determined by the side with the most advanced weapons, but by the side that uses people, weapons, and the battlefield most effectively.

In terms of understanding trading technology, the following issues require serious consideration:

Question 1: What is the goal of investors participating in investment?

Although there are many different views on this question, they can be summarized into two categories: "getting rich" and "financial management."

If the goal is to achieve "getting rich," investors focus on the short-term appreciation of assets. Therefore, their focus is on individual trading opportunities and maximizing value. Trading technology has limited performance in achieving this goal.

Advertisement

If the goal is to achieve "financial management," investors tend to value the process of asset appreciation. Therefore, their focus is on the stability of the entire asset appreciation process and the overall performance of a large sample. Trading technology may be helpful in achieving this goal.

Question 2: What is the investor's life choice for investment?

If investment is considered as an option in life, investors have the following options: full-time or part-time, professional or non-professional. These four options can form four combinations: full-time and professional, full-time and non-professional, part-time and professional, and part-time and non-professional.

The so-called full-time and part-time here are divided according to working hours. If the main working time is used for investment, it is full-time. If investment is done during non-working hours, it is part-time. The difference between professional and non-professional refers to the difference in professional ability. If one can make a living by investing ability, it is called professional; otherwise, it is non-professional.So, obviously, the success of an investment does not depend on the extent to which it occupies working time, but mainly on the degree of mastery of professional skills. Mastery of trading technology directly contributes to the improvement of the level of investment expertise.

Question Three: "Scientific Type" and "Genius Type," which one do you belong to?

We must acknowledge geniuses; there are geniuses in every industry. If you are not a genius, then taking the "scientific" investment path is a professional road with a higher probability of success.

So, how can you distinguish whether you are a "genius"? Anyone who thinks about this question is not a genius. Those who are not geniuses must rely on postnatal efforts to strive for success. The study of systematic trading technology is an important part of postnatal efforts.

Question Four: What is the most fundamental obstacle to successful investment?

Human weaknesses are the most basic obstacles to successful investment. Human weaknesses, especially the greed and fear in emotions, we have quantified and talked about many articles on mentality in WeChat, so we will not go into detail here. Therefore, whether one can restrain human weaknesses is the key to long-term investment success.

Question Five: What is the fundamental purpose of mastering investment technology?

Many people do not understand and think that mastering investment technology is to "defeat the enemy and win." In the view of many professional investors, this is a fundamental mistake. We master investment technology, not to defeat others, but to conquer ourselves. We develop a trading program, not to defeat opponents, but to restrain our own weaknesses.

Question Six: How to view the relationship between risk and return?When developing technology, one of the common questions that investors grapple with is how to view the relationship between risk and return. Many investors tend to maximize returns. The usual approach to maximizing returns is to optimize the system. This is a harmful tendency.

Investment practice tells us that there are two principles for dealing with the relationship between risk and return: one is the principle of balancing risk and return, and the other is the principle of matching risk and return. That is to say, we should not pursue investment techniques that appear to have a very low degree of risk on the surface, as this method should usually raise our vigilance. The investment techniques we choose must be adapted to our mental state.

Investment should not only be based on financial capacity but also on mental strength.