Two Types of People Who Make Money in Trading
It is well known that in this field, there are fundamentally two types of people who truly make money: one type with a smooth feedback cycle, and the other that operates infrequently, but profits massively when they do.
The First Type
Smooth Feedback Cycle
Let's talk about the first type: the smooth feedback cycle. This actually encompasses many techniques, such as scalping, momentum trading, spreading across multiple varieties and eliminating mistakes, etc. These methods can be understood as small money-printing machines, and the correlation between building a position and realizing profits is very strong for this kind. This ease of execution is crucial.
Scalping: Enter at the bid-ask spread, exit at the bid-ask spread. If scalping involves discussing retracement entry and pursuing a breakthrough, it's pure nonsense.
Momentum (Breakout): Capture a wave of inertia, whether induced by stop-loss order or follow-through buying/selling. Good traders usually place their orders at the stop-loss point because it has a certain advantage over follow-through points and is relatively genuine. To ruin a momentum trader is simple: teach them technical analysis, teach them to swing trade, and they will slowly encounter problems, becoming less innocent, leading to indecisiveness and untimely position adjustments or even refusal to cut losses.
The above describes the first type. The key to their success is maintaining consistent actions, keeping a pure mind, and executing according to the rules.
The Second Type
Seize Trends for Major Moves
These are the ones who operate infrequently but profit massively when they do.
Whether you enter on a retracement, bottom picking, top-touching, or moving averages, whether you use pure technical entry or a combination of fundamentals, these are just entry methods and are not important in themselves.
What is important is maximizing the use of the trend. As everyone in this field knows, we are all follow-through traders of varying sizes. The only value of technical analysis is identifying a higher follower and then building a position. Many people have high success rates for this reason, while others have low success rates or inefficient positions also because of this.
For example, you see the weekly chart indicating a rise and then find a position in the minute chart, setting a stop-loss at 10 or 20 ticks—isn't that foolish? It's common to trigger stop-loss orders and then remain inactive for three to five days or weeks. This happens because the acceptable loss threshold is not aligned with the required follow-through position.
Let's discuss the difficulties. First, you need to find a profitable method, one that makes logical sense and provides relatively smooth feedback.
This smooth feedback is essentially the closed cycle from trial to profit-taking. People are willing to execute if there is continuous positive feedback from the market.
Why is it that methods like breakouts and scalping, although demanding, have relatively high success rates? Because they are easy to execute and provide smooth feedback!
Once you accept these mentally, it becomes easier to continue. There’s little external interference, essentially allowing the market to do its thing while you do yours.
Finding these methods initially is challenging. Nowadays, with the internet, you can learn and hear about them easier.
What's more difficult? It's not just finding them but mastering them. That is, your mindset may not accept or be at peace with executing them.
In reality, the term "execution" shouldn't even exist. Trading should be trading—what's the deal with "execution"? It's about doing what fits, but even then, you might not like the style!
Over time, these people may be weeded out of the market or shift toward the second type, and then the difficulties of the second type arise.
That is, your current capital amount determines whether you can comfortably wait for the opportunity.
Years ago, I didn’t believe anyone could achieve stable profitability in just one year. As I met more people, I found out quite a few could, and many were very young.
It's about doing the right thing at the right time. The method coincidentally matches your personality perfectly. No need for agonizing introspection, no need for extensive market knowledge and self-awareness—everything just fits by chance. That’s luck!
Therefore, if you can trade, do so without overexerting yourself. Understand your character and condition. Seek verified market methods that match your personality, time cycle, schedule, and other aspects. Then try to execute. If it still doesn't work, widen the time frame and search for relatively certain opportunities. If it still doesn't work, then give up.
Secrets of Profitable Trading
Most investors get confused by the ever-changing daily market trends, losing sight of the essence of trading. They chase certainty, quick profits, and the elusive holy grail, only to get lost in the gains and losses, unable to grasp the core trading principle—learning to take and let go.
1. Learning to take and let go is the first step to successful trading. Both taking and letting go are important, but if you only take without letting go, the market will not give you a chance to survive. Conversely, if you only let go without taking, you will cut off your own path to profitability. A trading system that achieves stable profits must embody the way of taking and letting go.
If you seek large profits, you must understand that the prerequisite for such profits involves holding a heavy position, which is less secure than trading with a light position. Thus, you give up security. Conversely, if you prioritize safety, you must trade with a lower position, sacrificing the potential for quick profits. If you choose to close a position with a certain profit, you can feel at ease and avoid the pain of profit withdrawal, but you give up future profit potential. Conversely, if you choose to continue holding, you forsake peace of mind.
However, most investors fail to achieve the proper balance, showing their greed. They want low risk with high returns, to buy at the bottom and sell at the top, to catch the trend without enduring volatility...
Under various temptations for profit, everyone hopes to find a perfect trading method. Unfortunately, this is the market's biggest lie.
2. Most people get lost in the allure of profits.
Previously, I had a position I want to discuss. I held a short position that saw a rapid decline followed by a significant rebound during the trade. I had substantial floating profits during the sharp decline. However, due to the rapid drop, a friend made an early exit, manually cutting off the volatility and securing most of the profits.
There is no definitive right or wrong in this outcome. But clearly, we made different decisions. I chose absolute respect for the system, sacrificing the smoothness of my capital curve, willing to endure drawdown. He chose certain profit, sacrificing absolute respect for the system.
From this result, he might be right, as his profit was much higher than mine. However, in future stages, he may not always make the right choice because he fears uncertainty in extreme market conditions. Thus, if a larger market move occurs, he may lack the courage to hold the position. His decision-making ability and acceptance of trending markets will be reduced by this intervention, making his future choices potentially less optimal than mine.
3. Make your own choices based on actual conditions.
Everyone has desires, reflected in the amount in your account. If your desires are significant, your account balance should have a substantial proportion of your assets. Only large profits can satisfy your desires and provide the motivation to continue trading.
However, we must understand and make trade-offs. To gain more profits from the market, you must give up more, such as enduring volatility in your total assets, possibly losing composure and calm due to profit fluctuations. Lowering your desires to a balanced state, controlling your position size, and pursuing your inherent profits can make you more composed, leading to deeper understanding and significantly improving your trading level.
Buying low and selling high is challenging to achieve. Even if successful, it is not sustainable. If you only take without letting go, the market will abandon you. Therefore, traders should value the way of taking and letting go, abandoning unrealistic fantasies, lowering profit expectations, reducing position size, refraining from excessive leverage, and avoiding the pursuit of overnight riches. By doing so, you may gain more.
For more related trading, please contact CWG Ahai
