The "respect for the market" we often say is not simply referring to the market itself, but essentially respect for human nature. Mr. Market is inherently fickle, but what bothers us most behind the market is the weakness of human nature. A master once said, don't go against human nature easily. Human nature is our innate weakness, which makes humans imperfect but more complete. In the end, only philosophy and faith can overcome human nature. This is why in investment, philosophy is above mathematics, and theology is above philosophy.
The last thing you need in trading is intelligence. The capital market is made up of millions of the smartest people. To beat the market, intelligence is the least necessary factor. To be a good investor, intelligence is also the least important factor. The market is the wisdom of all people, while intelligence only depends on individuals. At any time, individuals cannot defeat an entire organization. Those investors who think they are smart will eventually be eliminated by the market in the long river of history.
The first type of smart investors treat others as leeks to be harvested, hoping to make money from market games. The core part of market games comes from the fact that you regard stocks as simple chips, and then you think that someone will take your chips away at a high position. In this game of "passing the parcel", you will never take the last stick. However, as a group, this will never be achieved. There will always be someone who takes the last stick, and if you keep playing games, you will inevitably become the one who takes the last stick.
The second type of smart investors think they can predict the future. However, if someone could really predict the future, the Roman Empire, the Ming Dynasty, the Ottoman Empire, the Mongol Empire, etc. would not have perished. After reading a lot of history books, the most profound feeling I got is that the future is unpredictable. People always think they can predict the future of stock prices, the future of industries, and the future of companies. In fact, a few correct judgments may be due to factors such as the right time, the right place, and the right people. The probability of a person making correct predictions about the future continuously is zero.
The third type of smart investors think they are right and the market is wrong. This is the contrarian investor we often see. Historically, most contrarian investors have been eliminated by the market. Most of the time, the market is very efficient. Most people who shorted against the trend and bought at the bottom against the trend eventually died. There are also people like Robertson of Tiger Fund, who saw the direction of the Nasdaq bubble correctly, but could not hold on before the market peaked and was forced to liquidate.
There are some natural biases in human nature, which are harmful to trading and need to be overcome. Losing is inevitable.
This is a wrong gaming mentality. According to the principle of fund management, after losing consecutive games, the total amount of funds of the trader will decrease. Even if the risk percentage is maintained at the same level, the bet should be reduced due to the decrease in the total amount. According to the practice of gamblers, in a lifetime of trading career, as long as there is a continuous loss after losing games, the trading career will end. The principle of fund management also applies to consecutive wins, because the total amount of funds increases after consecutive wins, and the bet should be increased even with the same risk percentage. When traders determine a certain transaction, they often spend time in advance, and none of the technical, fundamental, and news aspects can be missing. This easily leads to a psychological bias that it is easy not to make mistakes and not to admit mistakes easily. In fact, trading is a probabilistic psychological game, and trading problems should be handled from a probabilistic perspective rather than focusing on a specific right or wrong. Every time you place an order, assume that it is wrong, it is normal to lose, and profit is a surprise. This is the correct psychological state. Only in this way can you avoid the tragedy of refusing to admit mistakes and turning small mistakes into big mistakes. Why few people can win in investment? In the final analysis, this market is an anti-human market.
