Traders must understand the five most basic lessons.
“How does it feel when you open a position?”
For you, this may be a strange question. For newcomers, facing such problems is the most overwhelming moment of the week.
Next, we will discuss some specific trading topics, such as making a list of each position we have traded, and discussing each position in detail. What is my trading logic? What kind of market catalyst do I expect to see? Who am I going to discuss with?
However, one of my most annoying questions and a topic I like to ask is: “Why don’t you increase your bargaining chips in this deal?”
Simply put, this issue can be the nature of the transaction. It is undeniable that most of the considerable profits are betting on a larger position to achieve excess returns.
95% of profits come from 5% of transactions. You may have 20 trading opportunities a week, but as long as 1-2 transactions can bring substantial benefits, the trick is to identify these opportunities as early as possible, and then do your best to buy or sell.
Fortunately, I gradually changed from a rookie to a trading veteran, remembering the old trading rules that many people don’t understand. The following 5 points are necessary and necessary trading principles for traders. I personally think that traders of cryptocurrencies such as foreign exchange, gold, stocks, or even Bitcoin, should learn seriously.
1: Respect the trend
Don’t fight against the market. No one is stronger than the market. Remember, don’t try to buy or sell at the top, and in the stock market, don’t just rely on the so-called valuation to buy or sell. To some extent, trading is “surrendering” to some smarter people in the market. These people may know more or have more information than you.
The importance of this trading rule can be better reflected in the cryptocurrency market. The continuous new high means that countless short-sellers have left the market. And those investors who have been doing long, not only have more funds, but also other advantages that you cannot resist.
Although these words seem a bit “cliche”, they are definitely 100% correct.
2: Develop a trading plan, and then trade according to the plan
In the 1990s, one of my greatest gains at SAC Capital was to record and file all important matters and make detailed plans before trading. Whether it is a macro event, a company announcement, or even a management introduction, the news that can affect stock price fluctuations will not fall.
For example, foreign exchange traders are bound to pay attention to the non-agricultural employment report data regularly released by the US Department of Labor every month. Normally speaking, as long as the data performs well, it means that the economic momentum is good, and the US dollar will be strengthened by this good news.
3: Set profit goals and stop losses before entering the market, and plan the trading time period
This sounds very simple, but the execution process is very different. In most cases, you never know whether your decision is “right” or “wrong”. Only time will tell. And sometimes, even if you are right, you may not make money. The trading cycle, profit target and stop loss may all affect the final result.
4: Never turn trading into investment
The famous singer Bob Dylan has a famous saying “If something’s not right, it’s wrong.” (“If something’s not right, it’s wrong.”) Even with a small position, Once an error is found, stop the loss in time. We should not care about profit and loss when trading, but need to manage time correctly.
Once you sell a position, don’t waste time on it. Short-term profit or loss is not the key, we pay more attention to performance across time periods. Selling the wrong position and finding the right one is much more effective than wasting time on the wrong road.
5: Know yourself
Everyone has different risk tolerance, so no two trading styles are exactly the same. Some traders can hold 10 positions and pursue high leverage in order to maximize their effect, and are willing to bear the risk volatility caused by this. Others (including myself) want to control risks and always make trading decisions based on the risk tolerance of account funds.
In the final analysis, trading and investment are a manifestation of the way we make decisions. This process depends on our trading personality and characteristics, risk tolerance and experience. Therefore, when someone asks me whether I should trade or hold gold, bitcoin or other trading products, my answer is “I don’t know… tell me what you think.”