Most traders who just entered the gold foreign exchange market are doing short-term intraday trading. On the one hand, the gold foreign exchange market fluctuates greatly, and the profit and loss are also very large, which can easily affect the nerves of traders, so they are unwilling to hold positions for a long time. Try to make a quick decision; on the other hand, because of the high volatility, the risk is also very high. In order to avoid risks, I dare not hold positions overnight.
Therefore, they enjoy short-term intraday speculation every day, but after a period of time, they always make less money and lose more, with scars.
Although it is possible to make stable profits by doing short-term intraday trading, it is very, very difficult, which means that the success rate is very low.
Why is it said that the success rate of short-term intraday trading to achieve stable profits is very low?
Let's first look at the composition of intraday short-term traders, which are basically divided into two groups, one part is data traders, and the other part is technical traders.
For data traders, a certain amount of economic knowledge is required, but as an individual trader, what you have to think about is, is the ability of individuals to analyze data better than institutions? Organizations have far more resources and advantages than individuals, so how can they compete with them?
Moreover, the trading departments of many institutions are set up directly next to the exchange, and they have high-speed computers. They will always take advantage of the transaction speed. The price is always at a disadvantage, and most of them can only wait to be cut.
As for technical traders, some of them have not even formed a complete trading system, let alone be able to make stable profits.
Let's focus on why it is difficult for day traders who already have a trading system to succeed.
One reason for this is a lack of understanding of market trend cycles .
The originator of technical analysis, Dow Theory, clearly points out that the larger the period, the more obvious, stable and important the trend fluctuation is, while the smaller the period, the less obvious, unstable and less important the trend fluctuation is , especially "Intraday Clutter".
The trend of the big cycle is like the law of the tide. We can conclude the law of the tide through observation, even when the tide rises and when the tide ebbs; while the trend of the small cycle is like a wave, which is irrelevant and difficult to judge. Just imagine, who can How to judge the height of each wave?
And the smaller the cycle, the easier it is to be manipulated. We all know that prices are driven by funds. As long as the funds are large enough, they can affect the short-term fluctuations of the market. For individual traders, institutions are "swordsmen". The more they participate in small cycles, the easier it is to become "fish".
Another reason is that there is insufficient understanding of the ratio of winning percentage to profit and loss .
We all know that the key to profitability lies in the ratio of winning percentage to profit and loss. And too many people are pursuing the winning rate, thinking that the higher the winning rate is, the higher the profitability will be, and ignoring the importance of the profit-loss ratio, which is precisely to chase the end.
Here is a slightly simpler profit formula:
Profit = win rate × profit ratio - loss rate × loss ratio
= winning rate × profit ratio - (1- winning rate) × loss ratio
= Winning ratio × (Profit ratio + Loss ratio) - Loss ratio
Substituting the winning rate and the profit-loss ratio will find that the winning rate has a relatively small effect, and the profit-loss ratio is the key to truly increasing profits.
80% winning rate is already very high, if the profit-loss ratio is 1:1, the profit expectation is 0.6, and if the profit-loss ratio is 1:2, the profit expectation is only 0.4, and if the profit-loss ratio is 1:3, the profit expectation is only 0.2, after deducting fees, basically no money can be made.
But if the winning rate is 40%, the profit-loss ratio is 3:1, the profit expectation is 0.6, the profit-loss ratio is 4:1, it is 1, and if the profit-loss ratio is 5:1, it is 1.4.
Although this formula is relatively simple, it also shows that the key to stable profits is the profit-loss ratio, not the winning rate. In trend trading with a relatively large cycle, the profit-loss ratio is often 8:1, 10:1 is normal.
Of course, it would be best if you can have a high winning rate and a high profit-loss ratio at the same time, but it is very, very difficult. Because there are often contradictions between them, if you want to increase the winning rate, you must reduce the profit-loss ratio; and if you want to increase the profit-loss ratio, you must reduce the winning rate.
However, it is very difficult to achieve a high profit-loss ratio in short-term intraday trading, and can only pursue a high winning rate and a low profit-loss ratio. Of course, it is not to say that the model with high winning rate and low profit-loss ratio cannot make stable profits, but it is more difficult to achieve stable profits than the model with low winning rate and high profit-loss ratio.
So, if you want to fish, why not go where the fish are plentiful? And must choose to fish in places with few fish ?
Now that we realize this, how do we transition from intraday short-term trading to mid- and long-term trading ?
First, correct the cognitive bias towards market risk.
1. Correct the misunderstanding of risk.
Many people think that doing short-term within the day and not holding positions overnight is to avoid risks. In fact, this is a deviation in the understanding of market risks.
Once you trade, that is, enter the market, risks will follow and cannot be avoided. If you want to truly avoid risks, you can only do not trade. If you do not trade, you have no risk.
So what you have to do is to be willing to take risks, not to avoid risks . In other words, before you enter the market, you must be very clear about how much risk you are taking, and how much profit you are willing to take this risk to earn.
2. Correct the low awareness of risk control.
Many people enter the market without knowing how much risk they have taken. If the market outlook is in line with their trading direction, they will start to make profits. It seems that there is no risk; only when the market outlook does not meet expectations. There will be de facto risks, and after this situation occurs, there are no specific measures to reduce the risks, and when it is really impossible to continue to bear the pressure, they will reluctantly cut their flesh and leave the market. This is actually a low awareness of risk control.
The correct way is, before you trade, you have to estimate how much risk you are willing to take, and set a stop loss point at this risk level. Once you reach this stop loss point, you must exit the market and strictly control the risk .
3. Correct the lack of understanding of position risk.
Another reason why many people dare not hold positions overnight is that if the positions are too heavy, the risk is great.
If your position is lighter, you know how much you will lose even if you stop the loss, and you are willing to bear it, you can sleep peacefully and hold your position easily.
Therefore, if the position is well controlled, the risk will be greatly reduced.
Secondly, try to choose a larger cycle transaction.
It has already been explained that a larger cycle is more stable, and stability means safer. For us individual retail traders, it will be more beneficial for us to consciously choose a larger cycle for trading.
So what cycle is better? This is relative and varies from person to person, but try to exclude intraday trading, 1H, 4H, and daily lines are fine. Weekly and monthly lines are not suitable for margin trading accounts, because too much overnight interest will also reduce capital. Use efficiency. Personally, I prefer 4H and daily cycle, you can refer to it.
At the beginning, you may often lose control of your itchy hands and participate in small-cycle trading. This requires you to formulate corresponding rules and always remind yourself what your goal is. After a period of training, it will be much better.
Finally, try to improve the profit-loss ratio and winning rate.
You may have doubts, didn't you say that you want to increase the winning rate and profit-loss ratio at the same time, will there be conflicts? Yes, it's just that we need to increase the profit-loss ratio first, and then find ways to increase the winning rate as much as possible. That is to say, in the case of a high profit-loss ratio, try to exclude some trading opportunities with a low winning rate, which will relatively increase the winning rate. This will reduce the frequency of entry, which requires more patience and requires you to temper it slowly.
Looking at those traders who have achieved outstanding achievements, most of them are trend traders, and trend trading is mainly in the medium and long term. Therefore, if you want to achieve stable profits earlier, you should try to choose to trade with the trend Those who work together!
Add
