What is the essence of trading profit?

What is the essence of trading profit? As a professional trader, I often think about such a simple and soul-deep question. The author believes that the essence of trading profit is "earning the price difference of assets". "Acquired by this behavior. But it is a pity that almost no investment manager in the mainstream investment field, especially the group represented by institutions, will talk about "transactions". In their view, relying on transactions is a trivial skill, and it is difficult to make a lot of money, let alone form a scale There may be many people who do not agree with the above views, but the reality is that the investors who talk about "trading" are prevalent among individual retail investors. So, is the path to making money through trading has no future? The author believes that trading is also a way out.

In the process of financial investment, it is necessary to realize the importance of splitting and combining.

(1) The profit and loss of assets is caused by one's own ability or short board. It must be clear. Only when the problem is spun off can it be effectively analyzed and solved. It is the survival rule of different groups to maximize strengths and avoid weaknesses. The mainstream of current investment methods is still to obtain profits through value investment, such as stock valuation methods/valuation method systems, macro monetary policy systems in foreign exchange markets, etc. These fundamental analysis methods focus on "causes". It is difficult for ordinary retail investors to have the conditions to learn the entire and complete system of economics, and they also lack a platform for teamwork. This is the shortcoming of non-professional investors. We must be aware of it and choose to avoid it. Individual investors also have the obvious advantage of being "flexible" and can complete "transactions" through flexibility. Successful cases include the well-known foreign exchange market sniper Soros, the stock master Livermore, and the "quantitative trading" that has emerged in recent years, etc. These are all money made by trading. And this method of trading pays more attention to the "result", which is actually a different system of causal cycle than the "cause" that is emphasized by the fundamentals.

(2) There is a formula for successful trading: mentality + capital management + risk control + technology = success. However, this formula does not quantify it, and it only refers to "success" in general. In fact, the principle of the financial trading market is similar to that of casinos, and the key is the odds of winning between players and players or with casinos. If you and I toss a coin, neither of us has a chance of winning - each has a 50% chance of winning (it's a matter of probability). However, if you go to the casino to cast coins and the casino takes a 10% cut, you can only win back 0.9 yuan for every dollar you lose. This is the rule of the game. As the number of transactions increases, the cost will increase. If our system only has a 50% winning rate, losses are an inevitable result if we continue to trade for a long time. Then we extended to build a trading system, the trading system must meet one of the following two conditions: 1) Equal profit-loss ratio, high winning rate system 2) High profit-loss ratio, the winning rate can be relatively low. Only in this way can a trading system with positive returns be constructed. (There are many ways to build a trading system, which is another category and will not be detailed here.)

This is the split and combination of financial investment, including the split of the investment system and method, as small as the cognition or unknown of market transactions, and the loss or profit caused by which link or step.

Looking back, the essence of trading profit is to make a profit from the difference. How can it be done? There are many views that successful traders are "anti-human", and the author disagrees with this. Since it is "human", how can people be anti-human? Anything that can be reversed must not be human nature. If you can't get around this vicious circle, and turn against human nature and yourself every day, let alone not making money, it will be good if you don't become mentally ill. Therefore, correct thinking and cognition are the key to whether you can really make money!

The "Book of Changes" says that "the metaphysical is called Tao", the invisible and intangible "thought" is the topmost thing, "the metaphysical is called the tool", and the method that can be described clearly belongs to the lower level, so in In the process of trading, methods and methods cannot be learned, and if there is a problem with the way of thinking, it is doomed to end up as a loser. The "Tao Te Ching" says that "everything is born of being, and being is born of non-existence". In the same way, invisible thoughts determine visible behaviors. Let's talk about the core issues of how to make money through trading. If you have been trading for many years and still cannot describe the problem clearly, it means that you have not grasped the core and root of the problem.

Although trading is two simple actions, buying and selling, a complete supporting system is required to complete these two simple actions. A complete system, like the concept of a whole day, needs a day and a night. Similarly, a transaction also needs to be completed once a position is opened and closed. A truly successful trader pays more attention to the latter, when to close a position! Chinese people regard daytime as "Yang" and night as "Yin". However, in the actual trading process, people often focus on how to open a position, and pay less attention to how to close a position. The imbalance of yin and yang will inevitably lead to problems. In particular, closing positions after trading in the wrong direction is "error correction". This is the key to life and death in a trading career. Maybe old traders know the importance of "stop loss", but they don't really know how to do it!

In the process of trading, it is the biggest problem for traders to close the position too early when doing the right direction and failing to stop the loss in time when doing the wrong thing. Only by solving this problem well can the essence of trading become the essence of profit. Therefore, the core idea of ​​trading is to "get rid of self-attachment", which is also the only way mentioned repeatedly in the "Diamond Sutra". The right or wrong of the transaction is determined based on the trend after the transaction is completed. The subsequent trend has proved that the trend has not gone as expected. At this time, it is time to give up the original persistent view and direction and correct it in time. Only in this way can we save our lives and survive. At the same time, you can adjust your mentality to a certain extent and regroup. In the Tao Te Ching it is often said that "no self" probably has a similar meaning, and in the Heart Sutra it is said that "the heart has no hindrances" and it refers directly to the human heart. This is the "metaphysical" category. Next, let's talk about the specific "physical" method of trading.

People who really make money from trading must be people who follow the trend, not the so-called "sell high and buy low" people who look at petty profits every day. Why? The way of heaven will not make people want to "make big money" or "make small money", they can only choose one of the two. Whether you can understand this level is also very important. If you try to buy from the lowest point and sell to the highest point every day, you will definitely not make a lot of money. Even if you do a lot from the lowest point, you will get off early because you want to sell to the highest point. , will eventually miss a wave of big market perfectly! The correct approach is the principle that as long as the trend is there (trend lines and other auxiliary tools can be used), the list is there. Even if you get off the car early, you still have to dare to get on the car again when you find that the trend is still there. You must "suck the trend" like a leech. put. Successful traders use the combination of leech-like trend suction and error correction system to repeat and repeat transactions, and profit is the final result!