Many of us are often tormented repeatedly by the mindset of greed and fear, opening our phones hundreds of times a day to check the market, unable to eat, and waking up at midnight to check our positions.
Meanwhile, why can some people calmly HODL during a bear market until a bull market to take profits in batches, while we FOMO the highest during a bull market and then panic sell during the decline?
The answer is: trades driven by rules do not panic, while impulsive trades driven by emotions turn you into a gambler.
Once swept away by emotions, even a hero capable of moving mountains may find their mindset collapsing, let alone ordinary people like us?
The TV series (Taiping Nian) tells such a story: The Qian family of Wu and Yue—Liu Lang (Qian Hongzuo), Qi Lang (Qian Hongzang), and Jiu Lang (Qian Hongchuo)—governed the country together. After Liu Lang ascended, he received intelligence that the Southern Tang merchant Cheng Zhaoyue appeared to be doing business but was actually a spy for Southern Tang. He had bribed a large number of officials and generals intending to rebel. Liu Lang panicked upon hearing this and immediately summoned Qi Lang and Jiu Lang to discuss how to respond.
The three ultimately decided to test the court officials by pretending to heavily use the merchant Cheng Zhaoyue to see who agrees and who opposes. Those who agree may be the bribed traitors.
When asked about the old minister Shui Qiu, Shui Qiu saw through the little thoughts of the three brothers at a glance. He rushed into the palace overnight and scolded the three brothers severely. He said: "Do you really understand the true essence of power?"
Back then, your grandfather refused when the sorcerer said filling West Lake to build a palace would bring a thousand years of dragon fortune. He immediately replied that West Lake is the lifeblood for the people to irrigate fields and drink water. If the lake is filled, the hearts of the people will surely be lost; how can it last? The support of the people is the greatest dragon fortune.
Now you are testing the ministers and causing panic among the people over a mere Cheng Zhaoyue. Is this the way of a ruler? Discover the spies and send people to capture and interrogate them; if there are accomplices, take them all down in one go. As long as the one steering the ship remains calm, even if the storm is great, the ship of Wu and Yue will not capsize!
After listening to the old minister Shui Qiu's words, Liu Lang sincerely admitted his mistake, and Jiu Lang even knelt down in self-blame, only Qi Lang remained silent.
Later, Liu Lang passed away, and Qi Lang ascended. He was dissatisfied with the powerful minister Hu Jinsi and intended to smash a cup at the banquet to signal for his assassination.
Jiu Lang stopped him and said, "Brother, our Qian family dominates Wu and Yue not because we are the strongest, but because of our rules. Everyone knows our rules: clear rewards and punishments. If we destroy our rules, who will still trust us? Who will still follow us?"
Unfortunately, Qi Lang did not listen and was ousted during a riot. Later, Jiu Lang took the throne. He learned from his brother's lessons and made it clear that subjects could secure their lives by following the rules. He gained the support of the people and became a wise ruler.
In the cryptocurrency market, retail investors are often like Liu Lang and Qi Lang: they greedily chase after any coin that rises, panic sell during a crash, fail to take profits when they earn, and hold on until liquidation when they lose. Without rules for entering and exiting the market, their mindset fluctuates with the K-line, positions rise and fall, and ultimately, regretfully leaving the market becomes inevitable.
Managing funds is like a ruler managing subjects; it is essential to establish rules, which is a systematic trading framework.
We cannot control the market, but we can establish a trading framework that allows us to stay at the table regardless of market conditions. As long as we can lead our "subjects" to survive in a bear market war, we will definitely enjoy the best returns during the boom phase of a bull market.
Why? Because rules manage not only positions but more importantly, manage one's own mindset. If holding positions makes me lose my appetite and sleep, how can my mindset be good?
Just like the Qian brothers mentioned above, you test the ministers over a mere spy. Can such a dynasty gather people’s hearts?
Here are some suggestions for designing trading rules; everyone can start building their own rules from now on.
The risk taken in each trade should not exceed 5% of your total position. Investing is a lifelong game; finishing it in one go is not trading, it’s gambling.
Buy relatively low and sell relatively high. This means not to chase after rising prices or panic sell; take profits when they are available. You can observe whether it is relatively high or low through simple indicators like Bollinger Bands or MA.
This is also what I believe is the most important point: live longer than the giant whale. After reducing his position under the siege of large funds two weeks ago, Yi Lihua welcomed a three-day giant V rebound, but don’t think that ETH has hit its bottom; there’s still TOM LEE’s treasury fund. Can your position outlive the giant whale? Bitcoin’s micro strategy can last for years; can your position endure until that time?
Whoever can have rules and manage the subjects according to those rules can gather people’s hearts and become a ruler; likewise, only those who can build their own trading system can face storms without panic and play the lifelong game of investment trading well.