Author: CrytoPriceExplorers

02/02/2021

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Everyone knows the risks involved in trading, but not everyone knows where the risks come from.

Many people think that the risk comes from the uncertainty of the market, so they want to determine the market through various technical means; there are also many people who think that the risk is because the price is not bought at a good price, so they delve into various analysis methods and want to buy it. Some people think that the risk comes from the mentality, it is precisely because of their bad mentality, impulsive, emotional operation that brings risks to the transaction. In fact, these factors do bring risks to transactions, but they are not the nature of risks.

Securities transactions are delivered in cash, profits and losses are settled in cash, and the game ends when the funds are lost. Therefore, the main body of risk is the funds, which are presented to us in the form of losses.

Every transaction loses as much as there is a risk, so the transaction must first be calculated as a loss, rather than first as a profit. Many people do transactions habitually to calculate how much they earn first. In order to maximize the profit, they do not hesitate to fill their positions. At this time, if they encounter a black swan and explode a big thunder, they will immediately be swept out by the market. Such a transaction The risk is 100%. Black swan is rarely encountered in a short period of time, but for a long time to do transactions in this way, it is not surprising to encounter black swan several times in a long trading career. It only takes one time. You can end your trading career.

The risk of each transaction includes two aspects, one is the biggest risk, the other is the planned risk. The biggest risk is the black swan. This is a risk that will not appear for a long time, but will die if it appears. In order to survive every transaction, this risk must be considered; the planned risk is the stop loss, which is set by the trader and cannot be interfered by the market.

The market is uncertain, but the profit can be determined. Once the profit is determined, the market will also be determined.

The fundamental purpose of trading is to make money. Therefore, many people regard profit as the goal of trading. They regard profitable transactions as right and loss-making transactions as wrong. Many people even have a wrong thinking. That is, as long as it is a profitable transaction, it is right. No matter how much you earn or less, it is this kind of thinking that makes many people unable to make a small loss and make a big profit.

Trading is for profit, but profit is only the result of correct operation, not the purpose of trading. There are only two results of a single transaction. It is either a loss or a profit. As long as the operation is executed as planned, no matter which result appears, it is the correct operation, not only profit is correct, and loss is wrong.

For long-term transactions, if you want to achieve annualized sustained profitability, which is often referred to as stable profitability, all you need to do is to jump out of a single line of thinking and look at the problem from the perspective of long-term transactions. Every transaction is either a loss or a profit, so long-term stable profit is a simple addition and subtraction method, profit-loss>0, which is often said to make a small loss and make a big profit. You don’t need to make every trade profit, but You can make more profits than losses.

Some people will say, then I will make money for every transaction, and in the long run it will be stable profitability. In theory, this is true, but in fact no one can make every transaction profitable, that is, the winning rate cannot be 100%, because The market fluctuates randomly and cannot be determined.

Some people also think that the market fluctuates randomly and is uncertain, so it is not that you can make a lot of money if you want to make a lot of money. If the market does not support it, you can only make a small profit. This kind of thinking is absolutely dominant among traders Most of them are accustomed to taking the market as the basis and following the market conditions to operate, and they are always unable to make profits run.

When a person plans to run for 5 kilometers, he will not give up because of a road accident at 1 km, because the plan is for 5 kilometers and it is just a small problem on the road. There is no need to give up. In trading, the situation is completely different. The vast majority of people will choose to terminate the transaction due to a small callback and change their plan to settle down.

Why is there such a big contrast? In fact, it is because 5 kilometers can be determined, and the future market is uncertain. In fact, people make wrong decisions because of anxiety about uncertainty.

The mystery of letting profit run is to determine, let the profit target be determined, just like a normal running plan.

Determine the target, rather than follow the market to change the target. Once the target is determined, the market will follow it.