If you cannot strictly abide by discipline, you may make 10,000 mistakes; however, if you can strictly abide by discipline, you will not make any mistakes.
This article will tell you about the five stages of trader advancement. I hope you can gain something from it!
1. Master the basics of technical analysis
When you first start to get involved in the market, you will be exposed to various comments and suggestions, such as technical indicators such as RSI, KDJ, MACD, as well as trend lines, cutting lines, wave Gann theory, entanglement theory, etc. If you are interested in the market, you will work hard to learn these theories. These theories provide you with the most basic foundation for technical analysis. After mastering certain basic knowledge, you will learn how to look at the points. With a deeper understanding, you will understand the meaning and level of support and resistance levels, and know which ones are important and which ones are not important. Although you may make a profit at this stage, it is generally unstable.
2. Determine the short-term entry and exit direction
At this stage, you begin to realize that it is not enough to just look at the point. You also need to use indicators to determine the short-term entry and exit direction, and use the big cycle theory to determine the general trend direction. Although your account begins to make a profit and you know that you need to let the profit run, you cannot achieve a stable income overall. You may grasp the general direction for a period of time and earn several times the profit, but then lose it all. This is because you cannot always grasp the overall direction of the market. At this stage, you need to accumulate experience, and many investors may leave because of this.
3. Determine the trend or volatility
At this stage, you will judge the current state of the market through factors such as the overall economic environment, supply and demand, purchasing power, and technical cycles, as well as understand market sentiment through behavioral economics, herd effect, and market equilibrium stage theory. After comprehensive judgment, you will gradually become familiar with the characteristics of investment products, just like how a love saint knows different girls well through long-term contact with them. At this time, your account begins to make stable profits and will not be affected by small fluctuations, good or bad news in a short period of time. You will also know that it is acceptable to relax the stop loss appropriately in some cases, because some fluctuations do not affect the overall situation. The most important thing is to start knowing when to hold the currency and wait and see, learn to be short and patient, and understand that you should not make money that you should not make.
4. Understand the big economic cycle and don’t be affected by the first three stages
In this final stage, you have become a real investor, and no longer think that the people in the previous three stages are just speculators. You no longer care about theories or whether the Fed raises interest rates today, because in your opinion, all of this is already well-prepared and taken for granted. You may only spend a small amount of time every day to pay attention to information such as the Wall Street Journal and Bloomberg. The thing that really gives you a headache may be that your daughter falls in love with a decadent guest in the compound next door. You are indifferent to the profits or losses of other investors, because in your eyes, their money will sooner or later go into your pocket.
5. You need not only an effective trading system, but also firm belief
As a famous saying on Wall Street goes: "Good traders trade on conviction, while mediocre traders trade on technique." This sentence explains well why technique and conviction are equally important for trading success.
Many people have a profitable trading system but are unable to execute it, largely because they lack confidence in the system. Therefore, some people put forward the idea that we should not only have a trading system, but also a belief system.
Often, people think that successful traders are successful because of their intelligence and hard work. However, this is far from enough. For investors, the key factor that determines the success or failure of a trade is belief. The size of self-confidence determines how successful a person can be.
It is said that whenever Napoleon came on the field, the soldiers' fighting power would double. The fighting power of an army depends largely on the confidence of its generals. Before a major battle, the confidence of generals can greatly enhance the courage and fighting power of the army. If the generals show doubt and panic, the entire army is likely to fall into chaos and vacillation.
The spirit and ability of a person, like the army, also rely on the support of will and belief. People with strong beliefs can achieve extraordinary results even with the simplest trading system. Those who are full of doubts and timid often fail to succeed. A person's achievements often depend on his self-confidence. The prerequisite for success is self-confidence.
So, how can you form a firm belief in your trading system in trading? The answer is simple: be familiar with the system, understand the system and integrate it. Technology must be combined with a trading philosophy that you firmly believe in to have an internal ideological root, so that the technology can be deeply rooted.
Technology is actually a kind of thought. Only when you fully understand and believe in the system can you use it freely without any hindrance. If you hear about technology from others, you will inevitably lack internal strength in the process of using it. Just like duckweed in the water, once it is hit by wind and rain, it will fall apart and become shaky.
The process of traders pursuing perfect trading is a process of constantly moving closer to themselves. This is a process of continuous fusion, consistency and integration of the external system and the inner self.
When we first start trading, we use other people's systems and strategies. Therefore, once we encounter difficulties, we will have doubts about the system in one way or another, which will lead to investment failure. Then, we constantly reflect on ourselves in failure and gradually realize our own trading methods and trading philosophy in trading.
When we gradually transform "others'" into "our own", we can truly integrate the system with ourselves, and begin to build our own trading beliefs and trading skills, reaching the state of unity between man and sword. Only when we operate the trading system completely based on our own practice and understanding, can we feel at ease and have a plan in mind, thus achieving inevitable and continuous success.
Through repeated operations and insights, we can quickly turn other people's trading systems into our own trading systems. When we first start trading, due to the difference in thinking between us and others, we often become stagnant and rigid when operating other people's systems. However, as the number of transactions increases, we will gradually understand the principles and trading philosophy of the trading system, and gradually integrate it into our own thinking, forming new ideas and beliefs. The perfect transaction must be your own transaction, and you should trade with a system that you can understand and agree with.
During the entire trading process, if we start operating without understanding the practical significance of each step of a trading system and how the entire system makes a profit, and we can only understand the pros and cons of the entire system from the profits and losses of the current transactions, and cannot think and understand based on the system's profit principles and market philosophy, then this kind of transaction will inevitably lead to losses and failure.
This is why I don't agree with blindly operating a trading system that you heard about. As the book "Wall Street Ghost" says: There are still people who want to successfully achieve stable profits by learning the trading methods and strategies introduced in a book. This is a big joke.
The Turtle Trading System has been published for nearly 20 years, but how many people can make stable profits with this excellent system in actual trading? What you learn from books is just the techniques, not the mindset. Techniques can be learned from books, but the trading skills related to the techniques must be taught by example.
All wealth comes from a clear and correct understanding of a thing. In the investment market, correctly strengthening and cultivating one's trading skills is the only way to succeed in trading. The unchanging rule of success is to have deep trading skills and strict trading discipline.
It is an irrefutable truth that only if you firmly believe in the system can you achieve success.
Finally, I would like to tell you one sentence to end this article: If you cannot strictly abide by discipline, you may make 10,000 mistakes; however, if you can strictly abide by discipline, you will not make any mistakes.