In the previous article "The Only Road to a Successful Trader (Part 1)", we talked about the dilemma that almost every trader will encounter. Frustrated when you just started trading? This is really commonplace. The greater difficulty is that after you have experienced great success, you encounter Waterloo again. Perhaps, you will slowly begin to truly transform.
Today, we continue to talk about the second half of a trader's success, hoping to continue to inspire everyone.
Step 5: Why learn from the lessons of predecessors
Trading is the same as life. There is a classic saying, which is applied to traders. Why do we understand so many truths, but still can’t live this life (can’t trade well)? In this day and age, we are lucky, because there is so much great wisdom for us to read, but most people, choose to ignore.
We all have to go through the same struggles, make mistakes, and live the "great story" again and again.
It hit me like a bullet when I reflected on all the things I had done wrong after suffering a disastrous loss in digital currency.
Are you like me? Although aware of being attacked, I don't know how to make a decision. I know the market has turned and I should get out, but I can't pull the "trigger".
Deep down, I just couldn't accept failure. I used to think I was a good trader, cautious and decisive. But now, I'm faced with a new reality. I'm not as good as I thought I would be.
As Paul Tudor Jones (Paul Tudor Jones) said, "losers will choose to increase their positions when they lose money to spread the cost".
Unless traders correct mistakes frequently, they will not be able to correct them in a timely manner. This transaction of digital currency taught me the most important lesson.
"Reduce losses and release profits."
Step Six: Money Management
The wisdom of the predecessors can actually be summed up in one sentence: money management.
Cutting losses is one of the key principles that everyone must learn. You know you're going to be wrong a lot of the time. This means that you must protect your principal at all costs.
Paul Tudor Jones said: "I'm always thinking about whether I can lose money and how much I can afford to lose, rather than how much money I can make. Don't focus on making money, Instead, focus on protecting your existing assets and earnings.”
Money management boils down to a few key principles:
1) Good position control to minimize risks
2) Resolutely stop loss.
3) Don't use too much leverage
4) When you start to lose money, don't easily increase your position.
5) When you experience a severe losing streak, get out and take a break.
All of these principles should work together to protect your funds.
I actually learned this the hard way again just in the last few weeks when, after a losing streak, I cut my positions to extremely low levels and slowly found my rhythm.
In retrospect, this mistake is actually easy to see.
If you experience a loss after a heavy position operation, you will definitely not be able to continue the heavy position in the next transaction. Maybe you should use 30% or 50% of the position of the previous transaction. For yourself, this is also a punishment.
Step Seven: Don’t Focus Too Much on Others
It might seem odd to say that I don't follow other traders or the news. I may occasionally glance at the analysis of a trader I really respect to see if it matches my market feel, but this is very rare. I might also connect with a trader who I know well and has a long-term view.
But in the end, you have to follow your own point of view.
You have to become good enough that the only thing you can rely on most is your own analysis.
"Walking on the shore never gets your shoes wet", if you have a burning desire to trade and win, then you will find a way without following anyone else.
I highly recommend every trader to turn off the newsfeed for a month. Unfollow everyone on social media. Do not read news from any financial APP.
I promise you, you won't miss a thing. If something really significant happens (like a pneumonia epidemic), you're bound to hear about it because people around you will be talking about it. It's not worth listening to if the news is insignificant and doesn't appeal to everyone.
Also, psychologically, there is less focus (more on the transaction itself). Your feelings of anxiety and fear will decrease.
Ed Seykota, one of the best trend traders, once said, "Eventually, I became more confident in this trend trading, and after ignoring the market news, I became more comfortable with this method. .”
Most ordinary traders like to follow the news, they want the reasons why the market is going up or down. But they can't deal with the hundreds of daily news content.
In fact, the more you watch the news, the more you will understand that those unexpected events are normal events. The plague happens every day, and someone is shot every few seconds.
In a sense, news is poison. Bite your arm, suck the venom, and spit it out.
Step Eight: Form Your Own Trading Style
If you have come this far, then you have mastered the last key to successful trading.
Develop your own system.
Each trading master uses his own experience to present the theoretical knowledge he has learned in a differentiated way. What's the point if he just copied what the teacher taught him and simply passed it on to you?
Take kung fu as an example, the ancient kung fu masters not only learned from others, but also reflected on it. They study nature and themselves. Observe the movement of animals such as snakes and birds, and try to combine human structures to develop your own kung fu.
The same goes for trading, in the end, you will need to develop a trading style that perfectly suits your own personality, your own strengths and weaknesses. If you just follow others blindly, you won't be able to make decisions when the going gets tough.
As Ed Seykota said: "Everyone can get what they want from the market."
Why do some traders achieve stable profits? They are passionate about the market and eager to win. To do this, they become the best traders they can be by reflecting deeply and transcending their artificial limitations.
They go their own way, a lonely way, but also full of joy.
own way.
They decide their own lives and transactions. When they win, they don't get haughty. When they lose money, they don't blame anyone but themselves.
Also, they don't need any external validation, praise or flattery.
All the compliments and validation that legendary traders will need will be displayed in the only place that matters - their accounts and wallets.
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