For every trader, there is no best method, only the most suitable one for oneself. For instance, when we are building our trading system, we must make choices and not attempt to cover all aspects; moreover, in addition to being sufficiently familiar with the market and trading, it is even more necessary to control one's emotions, maintain rational thinking, and develop good trading habits, so as to have a higher probability of making profits rather than losses.
Preparation Phase: Selecting Market Types and Trading Systems
Firstly, you need to choose a market and select an active stock and futures type for trading. It doesn't matter what type it is, as long as it has good liquidity and you can afford the margin. At the same time, you need to choose a trading system, such as a moving average system. Whether your trading system or method is designed by yourself or purchased is not important; you don't need to spend time carefully selecting or forming your best system. This exercise is not about the system, nor is it testing your analytical ability, but rather training the mindset that will become your advantage and help you make a stable profit—probability thinking.
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In this training, no matter what system you choose, it should have the following key points:
Time Frame
Firstly, ensure that in your trading system, all entry and exit signals must be unified within the framework of a time frame. For example, if you confirm support and resistance levels based on a 30-minute moving average chart, then your risk and profit targets should also be calculated according to the 30-minute chart.
Entry Point
You must accurately define the entry criteria that are favorable to you, and try to exclude subjective decisions or judgments as much as possible. If the market and your system match, then you should execute the trade. If the market and your system do not match, then you should not trade. There should be no interruption by external events or random factors in this process.Stop-Loss Point
You must clearly define the maximum risk you can tolerate, and once the bottom line is reached, you must immediately close the position. Similarly, in any situation, regardless of the trading system you choose, there should be no superfluous subjective judgments. That is to say, external fluctuations and random variables unrelated to the variables in the trading system should not interfere with the trading decisions of the current trading system.
Timely Profit-Taking
In this training, this is the only place that requires caution. Many times we don't even know how much to earn to leave reasonably, after all, the market trend rarely shows a straight up and down shape. The continuous callback and rebound of the market can easily make you feel panic, and it is often difficult to hold a profitable position. You must be very experienced to objectively judge whether this is a normal callback, and whether the market will continue to move in the original direction.
Formal Practice: Accept Risks and Strictly Implement Trading
After selecting the trading variety and system, start the formal training. Assuming that we need to carry out at least 20 transactions, this exercise requires you to know your risk in advance before the 20 transactions. Knowing the risk and accepting the risk are two different things. You need to learn to calmly accept the risks in the practice. In this training, the potential risk is that you will lose 20 transactions. Of course, this is the worst and most extreme situation, just as extreme as you want to win 20 transactions.
The rules of the training are very simple: trade completely according to your system. Before you complete 20 transactions, you cannot be disturbed by the outside world, nor can you change the system parameters. This exercise defines the advantage with rigid parameters, relatively determines the probability, and determines all the transactions to be carried out. During the training, you will encounter two psychological conflicts: rational thinking VS emotional desire. How to resolve these conflicts is the most difficult part, but if you believe that trading is a probability game, you will find this exercise very easy. When you are familiar enough with your trading system and gradually overcome the emotional fluctuations caused by gains and losses in trading, then you have already possessed the most basic and important psychological quality to do a good job in trading.
Summary Feedback: Keep the Principles in Mind and Develop Habits
In the process of training, we can summarize and feedback our own transactions through methods such as supervision by others or third parties, self-recording and evaluation. Feedback is an important part of deliberate practice. Through supervision and recording, we can find the risk points in our own trading system and provide timely feedback and improvement. Summarizing and evaluating our own trading behavior and emotions can help us better execute discipline and control emotions in future transactions. Through the analysis and summary of transaction data, we can gradually strengthen the belief in probability thinking in trading. Only by continuously providing timely feedback, summarizing, and improving can we make our trading process more and more smooth, and gradually develop trading habits.Translate the following text into English: And when recording and evaluating, always remember five basic facts and five principles.
5 Basic Facts:
1. The trading world encompasses all possibilities;
2. You will not know what will happen in the future, nor do you need to know and determine what will happen next;
3. The market has variables, and the results of trading profits and losses are randomly distributed;
4. Each market and every trade has a unique outcome;
5. Probability is an advantage.
5 Principles:
1. Think and make decisions rationally and objectively;
2. Before each trade, you must measure the risk in advance;3. Fully accept the risk, and if unwilling to accept it, give up the trade;
4. Conduct trades according to established rules without hesitation;
5. Monitor and summarize any mistakes and potential errors, and make improvements, without harboring any fluke mentality.
If you have successfully completed more than 20 trades in a row following this practice method, without being distracted, emotional, and maintaining objectivity, then probabilistic thinking will gradually become an important part of your trading decisions. If you have not achieved this, please continue to train repeatedly according to the above steps. Once you believe that trading is a game of probabilities and develop such trading and thinking habits, the concepts of right and wrong, win or loss, will no longer seem so important.
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