What misunderstandings and detours do junior traders encounter at the beginning?

What are the mistakes?

In my understanding, apart from some misunderstandings caused by ignorance of market operating mechanisms and trading rules, there are two core misunderstandings: one is that trading is an activity that can make short-term profits; The essential reason for not being profitable (ignoring human error).

Let me talk about the first misunderstanding first:

This short term does not refer to the length of the holding period, but the period during which traders survive in the market.

Many friends don't need much time to adapt when they start trading. It only takes a few minutes to understand the trading rules. As for the market operation mechanism, learn by doing. All transactions are for profit. There is nothing embarrassing about it. Of course, you are enjoying the process in the end, but you must first ensure profit and live.

However, if you have achieved continuous profitability within a short period of time after entering the market, such as a few weeks or months, you think you have the ability to continue to survive. Once there is a decline in earnings or continuous losses, the consequences are often devastating . Completely lose confidence and exit the market (not even talking about financial losses here).

Another point is that an obvious reflection of thinking that trading is a short-term behavior is, "I only need to seize one or two opportunities this year; Make a lot of money, enter the market with 18 million yuan, earn hundreds of millions and billions, and then withdraw from the market and live a fairy life." Such thoughts are quite common. Have you ever dreamed like this at night? !

The reason for this misunderstanding is actually because you want to make a profit. Trading is an activity of exchanging interests, and there is no such thing as necessarily profitable or always profitable. In other words, you need to accept that profit and loss are complementary things, they are left and right hands, pros and cons, and both are indispensable.

This conclusion is difficult to understand. If both are indispensable, is it destined to even out profits and losses? If so, how do we, especially professional traders, survive? Need money to eat. From my understanding, this is a dynamic balance, and the cycle cannot be measured by the length of natural life. For example, Mr. Buffett may not fall like Jesse in his lifetime, but it does not mean that Berkshire Hathaway will always prosper, or that his legacy will not be ruined (although he said he would be naked. donate).

As a professional trader, you need to earn profits from the market to meet all expenses and savings needs in your lifetime, and to complete this work, you need a system of positive expectations. This positive expectation has limitations, just like technical analysis tools have limitations. It is difficult for you to find a system that can cope with all market conditions. There may be such a system, but its rate of return may not be enough to support yourself. In other words, if there were such a perfect system, we would all be saved.

Similarly, you also need to be prepared-one day you will not be able to cope with the needs of survival, similar to "going out to hang out, you always have to pay back", even if the transaction is legal and compliant. Regarding this point, I don’t know if my friends can understand what I mean. Maybe most of my friends don’t agree. It doesn’t matter. You can use your trading career to verify it.

The above is from the relationship between profit and loss, and then from the perspective of the transaction process. Trading is not something that happens overnight. The action of entering and exiting the market is very simple, just press a button or click the mouse, and the position may be held for a few seconds, or it may be calculated on an annual basis. But the previous preparation work, I don't know how long it will take, and I don't know if the expected effect can be obtained. Your preparation, entry and exit is a continuous process. Exiting the market does not mean the end of the transaction, but your funds are not on the market, but your consciousness cannot leave.

Market volatility presents opportunities for profit that may not necessarily materialize, even if you catch them. Then process control is to ensure that there are no human errors in the transaction, and to control and use risks to obtain possible profits.

The second misunderstanding:

We often say that there is uncertainty in the market. You have a rough judgment on the market, but the market outlook may not be as expected. Is this "not as expected" the essential cause of the loss? My understanding is yes and no.

On the surface it looks like this, if the judgment is wrong, then it will be a loss. In fact, when you make a decision to enter the market and exchange cash for the equivalent chips at that time, the first change is to connect the volatility of the market to your account. Your account equity fluctuates proportionally to market fluctuations. When you leave the market, you need to figure out whether it is the market that tells you to leave the market, or you want to leave the market yourself.

We will all say, of course it is the market. The system follows the market, and if the market tells me to leave the market, it will give a signal in the system. No. Your system only includes certain parts of market fluctuations, and you will never be able to make a system that fully reflects the laws of market operation, or in other words, it is impossible to have such a system. If there is, the market volatility will stop and all you will see is a horizontal line.

The signal given by the system cannot reflect all of the market. Believe me, friends, you enter the market by your subjective will, but your will is written in the system and let the machine and the chart speak for you. This is about leaving, but what about entering? The chart is fixed and reflects history. Is the fluctuation static? A chart is like a photo, which captures the shape of this section, what was it like before, and what will it be like after? have no idea. But why is it possible to predict the future based on history? Why does history repeat itself? Because the extremes of things must be reversed, the fluctuation is eternal. The market can be closed and trading activities can be suspended, but supply and demand changes constantly, because people are active and resources are constantly being consumed.

Therefore, uncertainty starts not only in the market outlook, but also at the moment of trading activity. And more importantly, it's not that the market is uncertain, there is no such thing as uncertainty in the market, it's you who are uncertain. It is not sure when the fluctuation of extremes will start, when it will end, and what kind of process is in the middle.

To put it more bluntly, your losses and profits all come from your ideology that you know and don't understand about the market. We often hear mature traders say: I didn't beat the market, but I beat myself. It is not because of my high level that I am profitable, but because the market bestows on me.

There is another saying: "Find certainty in uncertainty", or "Reduce uncertainty".

How to understand? Don't use the market as the subject, but yourself

In my opinion, there are two main misunderstandings:

1. Think that trading is basically equal to analyzing and predicting the market;

2. The cycle of impulsive recklessness and fear and hesitation is repeated without knowing it.