There are four elements in the foreign exchange investment theory:
Direction prediction, timing decision, risk management and mentality control
Directional forecasts answer the question of buying and selling direction. Relatively speaking, this step is the easiest, because the price change can be simplified into three directions: up, down, and sideways. If you go in the wrong direction, the rest is one level and one pair. There are less sideways, more ups and downs.
Forecasting direction is a relatively independent link, but timing and risk management are inseparable. This is much more important than direction prediction. The vast majority of investors who lose money are not because they cannot judge the direction when the big bull market and bear market come, but because they have lost too much money before the big market comes, and they have no ability to Do it or dare not do it anymore. Understanding timing is to understand that the foreign exchange market is essentially "investment + opportunity". Opportunities don't come around often, so it's definitely wrong to trade every day.
The success of speculation depends largely on your ability to judge whether opportunities arise. The stronger this ability, the less frequently you trade. Experts only observe market opportunities by strengthening risk management or shorting small amounts. Before the opportunity appears, they will never make a large sum of money easily, and once they find the opportunity, they will attract the enemy once they make a move. Opportunities in foreign exchange trading only appear at the moment when the long-short balance is broken. It is the "critical point" in the chart. Once this critical point is broken, the current operating state will change, and the price will inevitably choose a direction. Good timing can be achieved: 1. The entry and exit points are very clear, the stop loss point is not only easy to find, but the stop loss range is very small. Orders bought at this price are easy to deal with. 2. If this transaction fails, the next step should be very clear, that is, what to do after the stop loss order comes out should be easy to choose. A good time is when you can attack when you advance, and when you can defend when you retreat. Timing decides to answer the question of what point to do.
Risk management is about answering the question of how much to do. In the actual foreign exchange market, the control of the size of each order is very knowledgeable. Two traders, even their buying and selling directions, entry and exit points are exactly the same, but only because of the different quantities of buying and selling, they end up There will be a world of difference in the trading results of two traders, and one may be profitable while the other is losing money. As for whether the order volume should be increased or decreased when there are continuous losses in the transaction, the benevolent has a different opinion, and the wise see wisdom. Sporandi, a famous American investment guru, believes that the order volume should be reduced after consecutive losses. Another well-known investment guru, John Murphy, believes that traders should gradually increase their order volume when there are consecutive losses. I think more mature retail investors can tend to the latter, and novices should pay attention to the latter. In actual trading, single volume control is to achieve two effects: one is to make a large profit when doing the right thing in the transaction, and to make a small loss when doing the wrong thing. (For example, you can earn 100 points when you read the market correctly, and only lose 30 points when you read the market wrong). To do this, you need to cooperate with good timing, and strictly set the stop loss position and stop profit position. The second is to make money with large orders when the market is right, and lose money with small orders when the market is wrong. To achieve this goal, we need to pay attention to two aspects: first, insist on using pyramid overweight in transactions. Second, it is necessary to properly handle the choice of whether the order volume should be enlarged or reduced after consecutive profits and losses occur. A master can always make up the profit of one correct transaction to make up for the losses of many mistakes; the mediocre player can often eat up the profits of many correct transactions with the loss of one mistake.
Whether the above-mentioned links can be done well depends on the personal psychological control ability. In fact, the quality of the mentality is related to the character and experience. With the enrichment of experience, the psychological control ability will gradually strengthen, but once it comes to the reason of personality, it is not experience. It can be solved. In many cases, trading requires courage, that is, execution ability. For example, when the market is facing a breakthrough after a long period of consolidation, it is best to continuously increase the order volume when making continuous mistakes. However, few people have the courage to increase the order volume when continuous mistakes occur in actual transactions, because this requires extremely strong psychological endurance. Most traders will unconsciously reduce the order size when they are wrong.
In the final analysis, whether it is forecasting, timing selection, risk management or mentality control, only when combined with actual trading behavior can we truly understand its meaning. Divorced from actual transactions, any pyramid overweight, long-term and short-term are all empty and meaningless.
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