How bitter is trading? Struggling with human nature is like rebirth from the ashes, when the word "loss" is at the forefront, and one is left destitute, they must also endure the questioning gazes of friends and family. How sweet is trading? With leverage, a small investment can yield a huge return, the feeling of embracing wealth is as if one possesses the whole world, and from the envious eyes of others, you can see your own halo.
For traders, all love and hate, success and failure, joy and sorrow all stem from their own way of trading survival. What is the way of trading survival lies in your understanding and grasp of the five points introduced in this article.
1. The use of leverage
Leverage is the soul of trading, and it is extremely important in the world of trading. Since trading itself is a behavior of frame fluctuation, the trading market will use a large amount of leverage to generate its efficiency value. In the world of leverage, the price is not entirely equal to the value. More often, the value generated by leverage is far greater than the value generated by the price, which also brings risks.
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Many people will argue whether leverage should be heavy or light. In fact, this is a question that does not need to be debated. The only thing that can be determined is that the heavier the leverage you use, the higher the unpredictable risks, but it does not mean that the higher the leverage, the more dangerous it is. The so-called unpredictability comes from the trader's pressure and fault tolerance. When the leverage is higher, the fault tolerance will decrease accordingly.
The use of leverage and the acceptable loss range of funds are closely related to the stop-loss distance. Suppose a trade, our acceptable loss range is 5%, and the acceptable stop-loss distance is 1%, then we can only use 5 times leverage. However, if the same acceptable loss range is 5%, but the acceptable stop-loss distance is 0.5%, then we can use 10 times leverage.
Assuming we limit the fixed amount of loss for a single trade on the capital level, since the technical state of the market each time is different, the stop-loss distance we can accept is also different, and the leverage that can be used in the end is also different. Of course, you can also think in reverse, we first set the stop-loss distance, then set the leverage, and finally calculate the possible risk to adjust the stop-loss distance and leverage.
2. The speed of trading rhythm
There are two types of trading rhythm, one is the market rhythm, and the other is the trader's rhythm. In terms of high-frequency trading, the market environment that high-frequency trading likes best is a stable fluctuation range and sufficient market activity. The more active the market, the better the efficiency of high-frequency trading. On the contrary, if the market's activity is poor, the time required for high-frequency trading to eliminate risks may be longer. When the market breaks through the range of the fluctuation framework, it may cause damage to high-frequency trading. Therefore, for high-frequency traders, the importance of studying the market fluctuation range and activity is more important than the research on the market's directional research.For directional traders, once they determine that the market will move in a certain direction, it is not as simple as buying and holding, because in most market fluctuations, the path is not a straight line to the target endpoint. Therefore, it is necessary to segment tasks in the structure of positions, with both machine guns and cannons at hand. On the short line, it is necessary to settle multiple times like a machine gun, and on the trend target, it is necessary to hold the bottom position with a cannon, so as to eliminate risks through multiple settlements, and on the other hand, to avoid being left behind by the market through the holding of the bottom position.
So no matter what kind of trading method, traders should understand the characteristics of the trading products, understand their volatility and fluctuation space, and then adjust the pace of their own trading. When the market fluctuation is narrower, the settlement speed should be faster; when the market fluctuation is wider, the settlement speed should be slower; when the market is more active, the settlement speed should be accelerated; when the market activity decreases, the position should be reduced.
III. The choice of long and short lines
Many people, when trading, due to lack of sufficient preparation, even if they do the right direction of trading, they can't hold the position correctly, and the long-term trading is turned into a short line, and the short-term trading is turned into a long line, which is due to the lack of understanding of the cycle momentum and the reverse push position.
Every trader should have their own trading map, outline the battlefield they want first, so that you can effectively fight. The fluctuation of the currency, in terms of a year's time cycle, the probability of straight-line motion is less than 30%, and the rest are in a framework of fluctuation. Even if it is a trend fluctuation, it is like walking up the stairs, running step by step. So in addition to technical indicators, the golden section of the push forward and reverse push has become a very important tool, the golden section of the push forward and reverse push is not a special technical analysis tool, but through the calculation of the next step that can be reached through the segmentation.
After comparing the cycle momentum and the golden section of the push forward and reverse push, when the trader decides on the trading he is interested in, he can start to draw his own trading battlefield, whether it is following the trend or going against the trend, whether it is catching the top and touching the bottom or breaking through and following, it is easy to clearly understand the profit space and the possible loss distance, and then decide whether to proceed with this transaction. More importantly, it can avoid falling into the market trap, breaking through and following on the ceiling, and catching the top and touching the bottom also on the ceiling.
IV. The position of the transaction
On everyone's trading map, there must be many different positions that can be traded. Even if you start trading at the beginning, the market runs in your direction, and the efficiency of capital use is usually not high. Each position is like a bus stop, with people getting on and off. Many people are entangled in whether they should add positions against the trend, or only add positions with the trend. In fact, these are all fallacies, and trading without strategic thinking will not last long.
When you add positions against the trend, it is equivalent to catching the top and touching the bottom. When you add positions with the trend, it is equivalent to chasing high and killing low. When you go back to the debate between catching the top and touching the bottom and chasing high and killing low, it is just a return to the origin of trading. However, the most critical thing is how your positions are distributed, the utilization rate of capital, and the position you are in.When a good technical position emerges, in fact, we cannot be certain whether this position is the starting point. Regardless of whether you are following the trend for a breakout or trying to catch the top and bottom, it is the same. Generally, I would suggest that traders, after defining the starting point of their trade and entering the market, should prepare at least two more positions in both the same and opposite directions. This is conducive to traders engaging in the game of trading, achieving a state where they can attack and defend.
Following the trend does not necessarily mean adding to the position; it could also mean reducing the position and waiting to re-enter. Going against the trend is not necessarily about reducing the position; it could also be about promoting a big purchase at a reduced price. As long as it is within the trader's battle map, one can do as they please because the direction of the trade was determined from the beginning, unless you doubt yourself. A trader who makes good use of positions is bound to be a big winner, but this skill is not easy to master.
V. The Order of Trading
Using a simple grid trading math, from 1.1000 to 1.1200, make a position every 20 points, and the final trading cost is the same. However, the difference between adding to the position in the same direction as the trend and against the trend is the position of the price after adding the last position, one is a floating loss, and the other is a floating profit.
Assuming the end point of the trade remains unchanged, as long as it does not touch the maximum limit of the margin, the results of the two types of trading will be the same. However, during the trading process, traders will suffer. There is a saying in the industry that the best trades are the most painful trades, which is not only about the process of building a position but also about the process of holding a position. Most of the great trades in history are against the trend, taking what others abandon, which requires a confidence and courage to be against the heavens. During the process of holding a position, the desire for greed is mostly unable to withstand the fear of losing.
In the accounts of the vast majority of traders, most of the losing orders will eventually result in profits in the not too distant future. However, due to leverage, the results of profits are usually stillborn, which is the magic and charm of the market's fluctuation order. When you fall into the fallacy of a sure shot, you will fall into such a thinking trap, coupled with the higher the leverage, the lower the error tolerance, the road to victory is far away.
The market often goes against the trend first and then follows it, then against the trend and then follows it, follows the trend and then goes against it, goes against the trend and then follows it again, the permutations and combinations are not complicated, but they test your way of trading survival.
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