Over the past decade or so of trading, it can be said that it has been a process of enduring trials and tribulations. It's like walking barefoot on a rocky road, feeling the pain, crying out, yet still needing to think, summarize, and learn from mistakes.
Friends often leave comments on my articles, feeling that what I write is so real, as if I had installed a camera in their homes. In reality, it's because I have personally experienced it, which is why it resonates with everyone.
Falling into traps in trading is something almost everyone will experience. My understanding and perception of trading have evolved from being very one-sided and emotional at the beginning to gradually becoming comprehensive and rational. This entire process has been accompanied by a series of collapses and financial losses, so don't think you're an exception, because everyone has come this way.
Today, I would like to share 11 trading experiences I've learned along the way, which include both technical aspects and psychological aspects. If everyone can learn something from my article, make one less mistake, and lose one less sum of money, then my article would be considered valuable.
1. Many details in trading techniques can only be discovered through practical combat.
Why do I mention this issue first? Because I have stumbled many times on this issue, and I find that many people have similar problems.
For example, I used to trade by following trends with trend lines. The method is very simple: go long above the line and short below the line, follow the trend, and when the market runs, there is a large space for profit. What a perfect trading logic.
I thought it wouldn't be difficult, just maintain patience and confidence, and execute.
But when I actually executed, I found the gap to be quite significant.For instance, when drawing trend lines for positions, should you choose a nearby point or a distant one? Please see the image below.
The red and blue lines have selected different points for drawing. Choosing the red line for a long position would set a take-profit at 2327, while choosing the blue line would set it at 2319, resulting in an additional profit of 8 USD. Moreover, with the red line, a short position would have been entered at 2327, which is also 8 USD higher than the entry price with the blue line.
Different methods of drawing lines can result in a difference of up to 16 USD, which is quite significant. It is impossible to discover these issues without practical experience.
Later, I optimized this by adding moving average resonance, which resolved the issue. I found that other techniques also have similar problems.
That is why I always emphasize not to take your trading strategy for granted. You must do more backtesting and paper trading to truly experience whether your trading strategy is executable. Sometimes, what works in theory may turn out to be a mess in execution. If you want a more realistic combat effect, you can also achieve this with a small amount of real capital.
Never wait until it's too late to start thinking about change.
2. Your intuition is often unreliable.
Friends often ask me: I feel that gold is going to rise, what do you think?
Relying on intuition for trading has a major problem, which is that when you encounter adverse trading conditions, it can drag you into the abyss of losses.
Because "wanting to earn but fearing to lose" is our instinctive reaction in trading, especially during periods of loss, it can become extremely severe.Because during the loss phase, we instinctively become anxious, fearful, and angry. When emotions take over, it's easy to make incorrect judgments, leading to a "loss of feeling," which can cause us to underestimate risks and become overly confident in our own judgments, thinking we can definitely turn the situation around.
At this point, if you don't have a unified technical standard, you're in trouble. You enter a kind of frenzy mode, where you can enter the market at any position and take any position size, ultimately suffering heavy losses.
When people are emotionally out of control, they are prone to misjudgment. It's like blindly buying a stock, and you'll tend to believe that this stock will definitely rise; when you don't hold this stock, you'll tend to believe it will fall. People always naturally lean towards the side that is beneficial to themselves.
Therefore, you must never rely on "feelings" to make trades, otherwise, you will become a slave to emotions.
3. After placing an order, look at the software less, as it will seriously affect your position holding.
In the early years when I started trading, as long as I had a position, I would check the market every few minutes to see if I was making a profit or a loss, and how much profit I had made or lost.
If there was a loss or a decrease in profit, my heart would "thump," and I would wonder what was going on, why the market wasn't rising, and if it was about to reverse? I would quickly check the K-line chart to find reasons, and then consider whether to manually stop loss or take profit, which ended up breaking my technical standards.
Over time, this almost became a conditioned reflex for me. As soon as I saw the market reverse and the profit was gone, I would start to feel scared and entangled. Once scared, I would want to close the position, and I couldn't hold on to the order.
Later, I simply stopped looking at the market after setting my stop loss and take profit, letting the market run on its own. I would only occasionally check the trend at fixed times to confirm if the stop loss and take profit settings were correct, and I wouldn't look at the market at other times.
This cured my bad habit of not being able to hold on to orders.4. Market trends are bound to repeat themselves, and patience in trading is more precious than gold.
Anyone who has been trading for two or three years knows that if you consistently observe market trends and summarize the patterns, you will find that market trends are constantly repeating. There are indeed some trading opportunities with a higher success rate.
Why can some people seize these opportunities while others cannot? The difference lies in patience.
When most people are waiting for opportunities, they tend to experience the following psychological states:
Will the trend appear again? When will it happen?
This trend seems somewhat similar, should I give it a try?
This trend is missing one criterion, should I just go ahead and trade with a reduced position? At worst, I'll just earn less, right?
These are the "demons" in our trading, where we convince ourselves and provide countless reasons to trade. It's like when you're on a diet and craving food; you'll give yourself countless reasons to eat, such as the idea that one must eat when hungry, how can you work without eating, and that eating well is the most important thing in life.
Once patience is lost, our technical standards become distorted, and the trading opportunity we're pursuing is no longer the originally defined "high-probability trading opportunity."
The market is never short of repetitive trends; they will definitely come, it's just a matter of time. If you already have a high-probability trading opportunity that you are confident in, maintain your patience and wait for its arrival, without being distracted by other interferences.5. Learn to Assess Yourself
Most people start trading by first studying techniques, charts, and patterns, seeking the key to profit, yet very few begin by studying themselves.
However, in warfare, one must know both oneself and the enemy to be invincible in every battle.
There are various trading styles, such as short-term, medium-term, long-term, intraday, swing, trend, and so on. Each of us also has our own temperament, whether it be impatient, patient, easily angered, or having poor self-control; we also have our own routines, such as needing to sleep at 9 PM or being unable to sleep before 2 AM; everyone's financial situation is different, which determines the trading methods that suit you.
Trading is a very personalized matter. You should understand what kind of person you are, and then, based on your personality and lifestyle, develop a trading strategy that is uniquely yours. This will ensure that it fits you perfectly.
It's like going to war and crafting a weapon. This life-saving tool must be perfectly tailored to your own needs; otherwise, how can it help you achieve victories in crucial moments? Right.
6. Do You Experience Excessive Anxiety in Trading?
Assess yourself. Sometimes, do you find it hard to sleep with positions held overnight? Do you often wake up in the middle of the night to check the market on your phone?
In the early years of my trading, I hardly ever had a full night's sleep. No matter how tired I was, I would groggy wake up in the middle of the night to glance at the market. Sometimes, seeing my positions were stuck, I would suddenly become fully alert, then drift back to sleep. In my dreams, I would see the market reverse, and my positions would be freed and profitable. Upon waking to find it was just a dream, and seeing my positions were still deeply in the red, I would feel even more disheartened.Thus, I entered a cycle of fluctuating emotions, with a tense and excited mood during the day, and a drowsy and confused state at night, leading to a general state of listlessness and depression.
If your emotions in trading have already affected your life, you need to calm down and reflect on yourself. Is the position too heavy, beyond your bearing capacity? Or is trading taking up too much of your life? For deeper contemplation, are you really suitable for trading? Is it worth it to go to such lengths for trading?
Then adjust your trading state accordingly.
7. Don't let the last trade affect the current one.
When we trade, we always dwell on the previous trade, especially if it was a loss, or if we didn't do well, which is even more unbearable.
This is like being in a relationship where you haven't finished with the previous partner and then start a new one, only to find that your current relationship is filled with the shadow of the previous one. How unfair is that to your current trade!
Moreover, some people will close the next trade in advance because of the outcome of the previous one. For example, if the previous trade profited to 1000 and then retraced, you might be afraid of another retrace in this trade, so you take profits quickly at 1000. As a result, the market runs to 5000, and you end up slapping your thigh in regret, which is even more painful than a loss.
Sometimes, after a stop loss on a long position, it directly affects your judgment, and you dare not enter the next long position. Just as the market retraces, the long position soars, and you miss the profit again.
Trading is a long-term event, and you may go through thousands or even tens of thousands of trades. Each of your trades is just a point on such a long timeline, and it won't have a significant impact on the whole.
Therefore, we must separate the points from each other, distinguish them clearly, and not let them influence each other, so that we can rationally do each trade well.8. Never use averaging to replace stop-losses
The main reason for my account blow-up during the losing phase of trading was not cutting losses after being caught in a trade, but instead using averaging to reduce the average cost.
I hoped for a market correction to exit without loss or with minimal loss, doing so to avoid stop-losses. Indeed, this method often worked, and many times the market would oscillate and correct, allowing me to break even.
However, once I developed this habit, I began to take it for granted that the market would always oscillate and correct. I never anticipated encountering a larger one-way trend.
As fate would have it, I was hit hard by a significant one-way trend, either resulting in a substantial loss from cutting the position or a direct account blow-up.
I realized that recovering from 10 stop-losses through averaging is not as good as suffering a single loss from being caught in a trade. After many failures and losses, I finally understood that using averaging to replace stop-losses is impossible for profit, it's just a temporary escape.
Time and again, taking chances will inevitably lead to a huge price to pay.
9. Smaller positions do not necessarily mean less profit.
Proper position management can make profits more efficient, while poor position management can render even the best technical methods unexecutable.
When I first started trading, I would patiently wait for opportunities in familiar and confident market conditions. However, when the opportunity truly arrived, I would start to hesitate because I calculated that if I was wrong and had to cut my losses, I would lose $3,000. What if I was really wrong? How long would it take to earn back a $3,000 loss?After a moment of hesitation and indecision, opportunities can slip away in an instant. Watching chances pass by one after another, all I could do was regret.
Later, I came up with a solution. Since I was so afraid of losing $3,000 at once, it indicated that my stop-loss amount was too high. So, I wondered if reducing my position size would help? If I'm wrong each time, I would only lose $500. Would that make me feel better?
After implementing this strategy, the psychological pressure on me was instantly relieved, and my hands no longer trembled when placing orders. I felt that at worst, I would only lose $500, and if I was wrong, I would just wait for another opportunity.
With a better mental state, trading became more composed. Although the money I made each time was also less, my overall profits were actually higher than before.
Building a comprehensive trading system is not easy in the first place, and if your mindset is not right, it's impossible to execute it. At this point, if your trading system is also prone to many mistakes, that's even worse. Trading becomes as painful as cutting flesh, and how can you talk about execution then?
So, to ensure a stable mindset, it's better to sacrifice a bit of profit, have a lighter position, smaller drawdowns, and execute the trading system properly to truly make money.
10. Avoid Ineffective Trades
The market is constantly fluctuating, creating thousands of trading opportunities. Many people feel that there is an endless amount of money to be made in the market, and it's best to take advantage of all opportunities, as missing out on even a little is a pity.
At this time, you rush to enter the market without considering the stop-loss and take-profit ratios of this trade, whether the entry point is reasonable, what the direction of the larger cycle is, etc., and just engage in random trading. Even if you get lucky and guess right, the money you make is only temporary, and there are huge pitfalls waiting for you later.
Many friends trade because they feel that their position size is small, and it's okay to play around. For example, in forex, the minimum trade size can be as little as 0.01 lot. Sometimes, when they are bored with the market, they just trade casually, making a little profit if they are right, and if they are stuck, they wait and hold on, leaving when the market retraces.Over time, one may develop a mentality of luck, as when caught in a small position, one might think of averaging down to recover, only to end up deeply entangled, suffering significant losses. Or, when caught in a minor long position, one always hopes for the market to rise, thus missing out on the profits originally planned from the short position.
There are many such examples, which are typical cases of picking up sesame seeds while letting go of watermelons.
Trading is a very serious matter, not a game, because we are truly using our own hard-earned money, and if not handled well, it could result in a substantial loss. We must love money, cherish it, and only then will money love us back.
Develop a trading plan, and only engage in trades that fit within the plan; resolutely avoid opportunities that do not align with the plan. This is the only way to have a possibility of long-term profitability.
11. Cultivate good trading habits.
For some, trading might be a pastime, but for me, it is a job. I want to earn money consistently in this job, so I must have a plan and strive to improve the efficiency of my trading as much as possible.
For instance, I usually trade at a desk, and I always keep it tidy. The calculator, pen, scratch paper, sticky notes, glasses, will all be in their proper places, easily accessible, which makes my trading more efficient.
Additionally, my computer desktop is also very clean, with no unnecessary software, ensuring that my computer responds quickly and does not lag, which could affect my trading performance.
As you may have noticed from the candlestick charts I draw, my trading software's candlestick charts are also very neat, with clear colors and easy-to-understand visuals, allowing me to make more precise judgments on the market trends.
Everything around me is neat and orderly, which also improves my mood and makes trading smoother.So, do not overlook the impact of the surrounding environment on your own trading, as it is subtle and pervasive. I also maintain the habit of keeping trading records and regularly review and summarize them. This greatly helps in improving my trading skills, reflecting on and summarizing my trading issues, and maintaining my trading execution.
Trading is a very detail-oriented task, it's a competition to see who is more disciplined, who has a clearer mind, who can better control emotions, and who can pay more attention to details. I hope that my experiences can inspire you all, and I wish everyone smooth trading!
