The four successful steps that have been discussed above: relative advantage→ mode system(strategy) → discipline →fund management, which is more important?
If there is no advantage and mode, you can't win the game even with the best discipline and money management. The most important is the advantage and model. Speculators are constantly exploring or improving. They are concentrated in these two steps, so speculation in the market is biased towards technical analysis and various market indicators. .
There is a book named Encyclopedia of market indicators. The author Colby lists 127 different market indicators in the book. The purpose of this kind of books is to help readers find an advantage and turn it into a winning model. Its starting point and purpose are very good, but it is more important to find the trend or turn of the market faster and more accurately than your opponents. Currently, almost 99% of speculators know how to use technical analysis and market indicators. If everyone uses the same skill, how can there be a 'relative advantage'? So 95% are still losers.
“Speculate” in Latin's original intent is “observe”, which means spending time and effort to observe to find an advantage. If you can find the market direction faster and more accurately than your opponent with the indicators and technologies that the opponent does not have, isn’t that a relative advantage? Therefore, to become a part of 5%, you must learn from the beginning, learn the relevant indicators and techniques, and then observe, think and practice to develop your own unique model.
Keep making notes
People always ask, where cto find successful speculators? The answer is simple: if you can find a speculator with detailed notes, he is a successful speculator. If you write detailed notes every time you operate, you can have a review--which speculation is done right, which one is wrong, and what to do next time. This will make you grow quickly.
The notes are helpful for us to delve into the 'advantages', improve the model, test the discipline and manage the funds well. People always forget whether their speculative activities are wrong or right. Where is the mistake? So good notes help us think and reflect. If you ask about the high and low of the Hang Seng Index today, you definitely remember. But what about three weeks ago?
If you can't remember, how can you improve? The notes will be able to achieve the new effect.
If I can get to know the importance of notes early, I don't have to go a long way. But this habit is not easy to develop and it needs hard work.
Many speculators agree to scrutinize the detailed record and discover the advantages. There is nothing more than this: (1) follow the trend (2) stop loss quickly (3) expand the profits.
The question is: (1) how to take advantage of the trend? When will the trend turn or turn around? This is what I say of 'relative advantage' and 'mode operation'. Stop Loss and expanding profits, is the ultimate goal of 'disciplined operations' and 'fund management’.
The last piece of advice, don't misunderstand ‘tips’, ‘tips’ is a reward for good waiters. In the speculative market, there are no free lunches and no 'tips'.
Making use of emotions flexibly
There are many different emotions in people's growth, including joy, anger, hope, shyness, jealousy, regret, etc. Any emotion will affect our behavior. Here we don't talk about good and bad influences. But speculators should not pursue the realm of no desire. We must understand that emotions will affect our speculation and we need to use them. It is important to remember to use emotions, to take advantage of the situation, rather than to control it.
The speculative market is basically controlled by two major emotions. One is greed, the other is fear, and these two are difficult to handle, so the success lies in how to use these two. Those who know how to use this emotion, tend to be the 5% winner, while 95% of them are beaten by these emotions.
Speculators should practice using stop-loss and take-profit, and gradually change the mind of losing less and fear of losing profits into a winner’s mind of rapid stop-loss and profit expansion.
The two winner behaviors of ‘quick stop-loss’ and ‘make profit expansion’, which one is easier to do? There are different opinions. I think it cannot be generalized because of personality. ‘Quick Stop Loss’ is an active act. ‘Let profit expand’ is a passive act. It depends on your patience and personality. But as long as you make good use of stop loss and taking profit, you can succeed by practicing. The four stop-loss methods are relatively simple to make a profit because speculation has profit. There are four methods commonly used to stop loss.
1. Fix at the support level. Some people like to add five or ten points. Because this is the most common way. If everyone set in the support position, it’s more possible to crrash, so it is not the method commonly used by the winner.
2. Use the price to close the position. That is, when trading, clearly plan to prepare for the loss of only 50 points of the index or $2,500. This is also a good way to manage money, because if there is a winning mode, in a winning rate of 60%, each time winning an average of 60 points, so that it stops at 60 points or less each time, the result will be good in long term. But it needs to be sure that the winning rate of the mode is really 60%, otherwise the result will be different.
3. Indicator stop. When the speculators buy and sell according to their own indicators, and the stop loss and stop earning are placed in the mind, if the indicator no longer has the trading signal, it will stop immediately. Because when your indicator does not give you the signal to buy and sell again, you have no reason to stay in the market, you should immediately leave and wait for the next opportunity.
4. Time stop. Speculators use their own mode, using time as a guideline. In the 30 minutes or 60 minutes after the sale, the profit or stop loss will be terminated. This method is very personal and depends on the individual's speculative model. I don't recommend it because it is not suitable for general speculators.