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Novice traders have little chance of consistently making profits. While not every trade will be a loss, even the occasional illusion of gains can be misleading. At this stage, traders are characterized by several significant features. They are highly sensitive to the outcomes of their trades, often fixating on ways to improve their win rate. This fixation leads to two cognitive beliefs: that a high win rate equals a good trading method, and that they should find ways to improve their win rate.
Novice traders are particularly sensitive to the accuracy of their trades because the human brain is wired to be more sensitive to frequency than intensity. In the context of trading, frequency is represented by the frequency of two outcomes - making money and losing money. For instance, if a trader makes ten trading decisions and gets 5 profits and 5 losses, their brain will remember the frequency of these results. In contrast, intensity is represented by the degree of profit or loss in each trade, and the human brain is more adaptable to intensity than frequency. For example, if a trader loses 1 million dollars, the negative emotions they experience when they lose another 1 million dollars after a period of time will be much lower than the first time they lost the same amount. That is because their brain has gradually adapted to the stress caused by the negative event. However, if a trader continuously loses money ten times, the negative emotions they experience when they face another ten consecutive losses after a period of time will still be very strong, as their brain has not adapted to the stress caused by the negative events generated by frequency.
Novice traders exhibit a prominent characteristic determined by human instinct, which is influenced by genetic inheritance. From an evolutionary perspective, human ancestors inherited memory through DNA as a code, leading to specific tendencies such as a fear of snakes and spiders. However, research has shown that human instincts are not conducive to trading, or more specifically, not conducive to humans engaging in trading as a profession. This is evidenced by the fact that if human instincts were beneficial to trading, then many people should be able to make a living from it, which is not the case. Trading is often referred to as a profession that goes against human nature, and only those who can remain emotionally detached can survive in this industry.
For novice traders, the fear of losing money is not the most daunting challenge. In fact, I can confidently state that the most terrifying prospect at this stage is making money, commonly known as "easy money". Let me provide you with an example to illustrate this point.
Trader A started trading after completing a master's degree at the age of 27. Initially, they traded securities and earned moderate returns while working for well-known securities and futures companies in China. In early 2006, Trader A transitioned to forex margin trading and opened a trading account in Hong Kong with HKD 80,000, where they traded the popular EUR/USD currency pair. Over the two years from the age of 30 to 32, dramatic events occurred. Trader A's trading strategy was simple, using the basic moving average trading method and buying the euro without setting a stop loss. With the euro's bull market for two years, Trader A's capital multiplied and accumulated from the initial HKD 80,000 to almost HKD 5 million in less than two years.
By this point in the story, I believe readers can sense A's pride and confidence even through the screen. During an era when the USD to RMB exchange rate was 1:8, a young person under 35 years old had amassed a huge fortune in just two years. This experience posed a significant challenge to human nature. Some say that it's comparable to winning the lottery, but I personally think it's not the same concept at all. Most lucky lottery winners understand that winning is a random event and don't expect to win again, which is what psychology refers to as external attribution – the belief that the success or failure of an event depends on external environmental factors. However, when A experienced this event, A was likely to employ internal attribution – the belief that the success or failure of an event depended entirely on their own abilities rather than external factors. With this way of thinking, A would inevitably believe that this kind of success could be replicated. The following are some/>/>/>/>/>