Any trading strategy is based on a certain market analysis basis, which is unified with your analysis method. The so-called sense and intuition cannot be used as a guide and basis for trading.
I was also lucky, and once relied on my sense of the market to make a profit of 90% within three months. After the confidence soared, he made orders crazily, thinking that good luck would always be by his side, but it ushered in a liquidation. At first I didn’t believe in evil, but it wasn’t until after the continuous liquidation that I realized that foreign exchange trading can’t rely on market sense alone. If you want to make a profit, you must have a complete set of trading strategies.
The trading strategy must be combined with the analysis method, and the trading strategy without the analysis method has no practical significance.
Many master traders regard bottom-hunting and top-finding as profound failure lessons and are excluded from trading strategies, but for me, bottom-hunting and top-finding are the foundation and key.
Since my analysis method is mainly based on judging the turning point of the market, my trading strategy is very different from that of following the trend. The steps may be the same, but the content is different.
My trading strategy consists of several steps: trial trading, bottom position, order lock, increase, and position closing.
01 Trial strategy
The trial strategy is a position opening strategy adopted when there is a possibility that the turning point of the general trend may appear earlier than our prediction. The position is extremely light, and the opening capital is controlled below 10%, generally only 5%.
In our analysis method, the turning point of the general trend is generally definite and will generally appear as scheduled according to our prediction.
And sometimes because a certain market turning point appears beyond our expectations, we cannot be sure whether its turning level has been raised, which means that the turning point of the general trend may occur earlier than our prediction.
Since it cannot be completely determined as the turning point of the general trend, a trial strategy is adopted to stop the loss at the limit price of the turning point.
Stop loss is not a trading strategy, but a trading principle throughout the trading.
No matter how confident we are in our analytical methods, there is no guarantee that we can maintain an objective and calm state of mind at all times.
When we make mistakes, we use stop loss to correct the mistakes. Only stop loss can prevent fluke mentality.
Since it is a test order, I am ready to escape at any time. Running out of positions is an important preventive measure for trial trading strategies. There are two types of escape: one is stop loss, and the other is stop profit.
Since the test market is not a position opened at an unmistakable turning point of the general trend, it is necessary to confirm the turning point of the general trend at the next turning point. If this turning point does not strengthen the turning point of the general trend but strengthens the previous trend, take profit-taking measures.
The purpose of the trial market is not to make a profit, but the key is to calm the mind. Regardless of whether the test is successful or not, it has a depressurizing effect on alleviating the emotions of worrying about gains and losses. Sometimes it hurts more to lose a big opportunity than to make a mistake.
02 Bottom position strategy
The bottom position strategy is an undercover or top-down operation strategy carried out at the turning point of the general trend. The opening fund is more than 10%, generally controlled at about 20%, and the limit price at the turning point is used to stop the loss.
Both the test order and the bottom position are position opening operations, but the difference is very big. There are four main differences:
Judgments on the turning point of the general trend are different. The trial market is based on the judgment of possibility, and the bottom position is based on the judgment of inevitability.
The mentality is different. Although the test market may turn into a bottom position, it is ready to escape at any time. Although the bottom position also emphasizes stop loss, stop loss is only a preventive measure. No matter how the market changes, it will never stop profit.
The warehouse volume is different. The volume of the trial position is light, and the volume of the bottom position is heavy. The volume of the bottom position is 4 times that of the trial order.
The purpose is different. The main purpose of the trial market is to calm the mind, and the goal of the bottom position is to make a profit. The bottom warehouse plays a pivotal role and is the basis and confidence for subsequent operations.
The bottom warehouse operation generally implements the layout strategy of entering the market in batches in the turning area.
Generally speaking, there are not many one-day V-shaped reversals at the turn of the general trend, and most of them will form a process of accumulating momentum, which is large or small, and sometimes this process is quite long and dull.
Due to the heavy warehouse volume in the bottom warehouse operation, if you invest in it at one time, the psychological burden of enduring this long process will be heavy. Therefore, the layout is generally completed in three times.
For the first time to enter on the turning day, the capital is 50% of the bottom position.
The second time you enter at the turning point of the retest, the capital is 25% of the bottom position.
Enter for the third time on the breakthrough day of the turning pattern, and the fund is the remaining 25% of the bottom position.
If there is a one-day V-shaped reversal pattern, the bottom position is only the position that entered the market on the turning point for the first time, that is, 10% of the total funds, and the bottom position will not be increased.
Although the bottom warehouse volume does not reach the planned target, and the subsequent warehouse receipt layout will be reduced accordingly, this is a principle that must be followed. So I don't like V-reversals. Although V-shaped reversals make money quickly, V-shaped reversals make less money.
The running time of some transition areas is not long, and the smaller the level is, the shorter the running time is. However, some super general trends, especially big bull bottoms, run for a very long time in the turning area.
Therefore, in the process of sticking to the bottom order, we must have the mentality of persevering to the end. After setting the stop loss position, let the east, west, north, south, north and south wind blow, and I will stand still. The "moving like a mountain" in Sakata's warfare method is the mental method that should be used in this state.
If short-term trading is like a blitzkrieg, grasp the best opportunity, seal the throat with one sword, and go away with one blow, then long-term trading is like a protracted war, which is a long-term struggle of strategy, courage, confidence, and will.
Especially in the bottom position stage, due to the lack of floating profit guarantee, only the stop loss price is used as the psychological defense line, and it is difficult to achieve much without the determination to "stick to the city".
Many trading strategies that follow the trend take the breakthrough point as the bottom position to open positions. On the one hand, it is necessary to wait until the trend is confirmed, and on the other hand, it is to avoid the arduous and excellent process of "sticking to the city". This is also the shortcoming of undercover and undercover.
03Locking strategy
In my opinion, there are two types of locks: one is active locks, and the other is passive locks.
Passive lockup: It is because the order is placed in the wrong direction, and the position is forced to be locked up in order to prevent the loss from expanding.
Active lock-up: On the contrary, it is a lock-up operation to lock in profits on the basis of judging that there will be a secondary reverse movement in the market outlook.
Unlocking is a difficult problem for passive locking. Taking a passive lock-up operation instead of a stop-loss operation shows that the market outlook is not clear or has a fluke mentality.
Stop loss is a quick way to cut through the mess, and you can start over; while passive lock-ups are more stressful because of the psychological burden on your back.
Therefore, the best strategy is to cut rather than lock, even if it is wrong to cut. Our lock operation is active lock. The reason why the active lock-up strategy is adopted instead of the profit-making liquidation strategy is that the lock-up strategy has more advantages:
Keeping the bottom warehouse receipt has a psychological advantage. Bottom warehouse receipts with floating profits generally will not be easily closed. When increasing the price, the floating profit of the bottom warehouse receipt is also needed as psychological support.
There is an advantage in accumulative positions, and the profit margin of locked positions is greater. Re-entering the market after closing a position is treated as a new order. The position volume of the new order must strictly abide by the risk control regulations, and the opening capital cannot exceed a certain ratio. After the lock-up operation is completed, since the bottom position is still there, it can be stacked and increased, and the proportion of funds can be gradually increased. The position gap between the two will become wider and wider. Even if the liquidation operation strategy adds multiple reverse operations to make profits, it will eventually be inferior to the lock operation. The longer the trend lasts, the bigger the profit gap between the two.
Of course, if you have a strong mentality and self-control, you can also increase the cumulative position after the lock operation to the position of the new order after the liquidation operation. But this kind of operation tramples on the rules of risk control, and the more successful it is, the more it will encourage the expansion of greed.
A fluke of one foul will lead to flukes of many fouls, and the game gets deeper and deeper. In the risk market, trampling on the rules is tantamount to digging one's own grave.
The hedging strategy serves two purposes.
Not for the purpose of profit, just to avoid the ups and downs of mentality in the shock zone.
Profit maximization, long-term operation bands.
It is relatively easier to achieve the first goal. You don’t have to worry about the position of the lock, just lock the profit, and unlock it until you judge that the shock is over.
It is not so easy to achieve the second goal. First of all, it is necessary to judge the two limit positions of the shock box, and then perform lock, unlock, and even increase operations near these two limit positions.
This places higher demands on your analysis method.
Sometimes, the money earned from the lock-up operation will exceed the profit of the trend, but without the guarantee of the trend profit (floating profit of the bottom position), it is difficult to succeed in the lock-up operation. Therefore, the persistence of the bottom position is worthwhile no matter how hard it is.
04 Overweight strategy
If you don't know the harm of overweight, you don't know the benefits of overweight! From a certain point of view, it is more difficult to operate the overweight position than the bottom position.
For our analysis method, the difficulty of bottom position operation is not in the judgment of the turning point of the general trend, but in the process of sticking to it after entering the market. The difficulty of overweighting lies in the timing of overweighting.
Sometimes, the trend runs in twists and turns, and if the position of the increase is improper, you will be passive in the rapid fluctuations of today's daily limit and tomorrow's daily limit, and even the floating profit of the bottom position will be swallowed up and become a floating loss. Sometimes, the trend movement is full of joy and momentum, and good opportunities are missed in order to wait for a good entry position.
Therefore, the movement rhythm of the trend is very important for the overweight operation.
There are two ways to increase the size: one is the point method, and the other is the morphological method. Each has its own merits.
Point method: according to how many points the trend rises or falls, add a yard. Points are fixed. Different types of fixed points are different. The advantage is that it is beneficial to grasp the momentum of fast movement. The disadvantage is that you must have a firm and stable mentality in the face of shocks in the ups and downs of the trend.
Morphological method: It is the overweight of the market shape that operates according to the trend. Trends are made of sub-boxes. The morphological method generally adds weight once to the top and bottom of the shock box. In an upward trend, after determining the box body, first increase the price at the bottom of the box, and then increase the price once when the top of the box breaks through. In a downtrend, after determining the box body, first increase the price at the top of the box, and then increase the price once when the bottom of the box breaks through. The advantage of the morphological method is that the overweight position is better and it is easy to stop loss. The disadvantage is that it is not easy to grasp the trend of fast movement.
The increase amount of the two methods is the same, showing a pyramid layout, with the bottom warehouse amount as the bottom of the pyramid, and decreasing successively according to the golden ratio of 0.618.
Our overweight strategy uses the morphological approach. However, in order to better grasp the trend of rapid movement, after judging the turning point of the general trend, the first solution is the trend movement mode, and formulate an overweight strategy according to the trend movement mode.
Whether it is a fast-moving trend or a trend with twists and turns, its occurrence, development and end all operate according to a certain market rhythm, and the important top and bottom turning points generally fall on the rhythm point.
Whether it is lock-up or overweight, the market shape is only one of the basis for judgment, but to find a better entry and exit position, it must be operated in conjunction with the rhythm point.
The beat point is the most critical basis for judgment. Beat points are the most important support and resistance levels in the market.
In an upward trend: if the beat is at the bottom, it will become the driving force for the trend to advance; if it is at the top, it will become the resistance for the trend to advance.
In a downtrend: bottom beats and top beats act oppositely to promote and resist the trend. Under the observation of the rhythm point, the false breakthrough of the market form will be revealed.
Therefore, the stop loss operation after the increase is generally not determined according to the market shape, but according to the market rhythm. The limit price of the beat point is the stop loss position.
05Close position strategy
Actually for our analysis method, the closing strategy is not important.
Before a trading cycle starts, we have a general grasp of the overall trend based on the analysis and judgment of the long-term market, and as the trend runs, it will become increasingly clear when the general trend will finally turn.
Therefore, liquidation is just the natural end of a scene.
From the beginning to the end of any trend, there is a process of gaining momentum, breaking through, consolidating, sprinting and dying. However, sometimes, the demise does not occur before the turning point of the general trend, but after the turning point. The key to judging whether a trend ends lies in the market beat of the trend. When a market beat is completed, the turning point of the general trend is naturally approaching. Therefore, closing positions is not a strategy, but an analysis.
If analysis is the method of swordsmanship, then strategy is the method of mind. The unity of sword and Zen lies not only in your heart, but also in your sword. What kind of swordsmanship can match what kind of mentality, instead of first having mentality and then matching swordsmanship.
These trading strategies are only made for his own swordsmanship, and they are quite rough, and they still need to be tempered and refined in actual combat.
06 last
Yue Fei has a saying: The magic of using it all comes from one heart. Strategy is dead, just like the art of war, it’s just some rules and regulations of the basic rules, the key to using it depends on your realm.
For market conditions, there is a state of looking up, a state of looking up, and a state of looking down. If you can achieve the realm of looking down and transcending market fluctuations, what else can't be your sharp weapon!
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I hope this article can make foreign exchange traders get out of the confusion when they are in confusion. Old rules, if you haven't understood it, please bookmark it first! Welcome to leave a message to communicate with the editor!
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