To ultimately profit from trading, there are essentially only three methods:
1. Profit every single time;
2. Achieve a success rate of over 50% when gains and losses are roughly equal;
3. Minimize losses as much as possible when wrong, and maximize gains when right.
Strive to the extent that even if you trade 10 times and make 9 mistakes, as long as you win once, you can still be profitable. We know that the first situation is practically impossible. Therefore, most people consider the second method to improve the success rate. However, many people in real life have a good success rate but still end up losing money. In other words: trading 10 times, 9 times correct and 1 time wrong, still results in losing money! Hence, discussing the success rate in this market can often be misleading! We must first pursue the third method: striving to make a profit even if 9 out of 10 trades are incorrect, then consider improving the success rate! Why do some people, or most people, end up being eliminated by the market or leaving after losing money? This is somewhat related to our nature. Human instincts are very unsuitable for trading: greed, fear, and luck... Therefore, it's very normal to take the profits in hand when you can. At the same time, human nature is a process of continuous learning. Most people have heard a lot about cutting losses and letting profits run when they start trading, but often after stopping loss, the market reverses, and letting profits run ends up taking an elevator down, or even turning gains into losses. Moreover, in the actual trading process, not stopping loss and securing small profits quickly often builds up significant profits, as the market oscillates 70% of the time! When we realize that human nature is the problem, we naturally come up with the idea of "mindset deciding destiny" and try to change our mindset. In reality, this is an impractical proposition! It's easier to change a dynasty than to alter one's inherent nature. How can inherent nature be easily changed? Thus, an easier way to deal with nature and mindset is to establish a practical trading system and trade systematically. Establishing a trading system is relatively easier than executing it systematically since the execution process also involves human nature! People's inherent concepts of profit, loss, and money are severely hindered by greed, fear, and luck in the execution! So, the important question is how well you execute! Regarding how to establish a trading system, I think the first step is to understand the market, know how the market operates. The stock market operates in its way, futures in another, and the forex market in yet another way. Therefore, to develop a trading system, it should generally follow the operational pattern of the market. Various bizarre methods of predicting the market have viability only when they conform to market operations; when they go against it, it is better not to pay attention to them. A breakthrough may be a false breakthrough; the market is simply not ready. There are no fools in this market; the only way to profit is not to push the market up but to leverage the market's power to go up. Otherwise, what goes up must come down! Whether the market is ready can be known after a breakthrough. So, in trading, a breakthrough necessitates action, but whether to stay, increase, or decrease the position is only known after it happens. This market is ever-changing yet unchanging in its 'principle'. What is the principle? Profiting for the market makers is the principle; the mode of profiting is the principle; participants losing money is the principle! The sole purpose of speculation is to make 80% lose money to 10%, the remaining 10% just go through the motions.
Therefore, change is the eternal theme of the market, but unchange is also the eternal theme—human nature remains unchanged.
For more information on trading techniques, please contact CWG Ahai.
