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Compared to professional traders, senior traders possess not only the ability to consistently profit in the market but also the ability to maximize their profit potential through the use of a technical knowledge point known in the industry as "position management". Position management involves opening, closing, adding, and reducing positions, which may seem simple, but mastering effective position management is a challenging task. Hence, in trader training, novice traders and even professional traders are generally advised not to use a compound position, nor should they add or reduce positions. From a scientific perspective, the best way to learn a complex skill is through a gradual and systematic approach, much like building a house. One must first understand the basic knowledge, then reinforce it through training until the knowledge becomes ingrained in the brain. After that, any new knowledge should be tested to ensure that it does not conflict with previous knowledge. Novice traders often face significant difficulties in learning because they tend to immediately apply what they have learned and then learn new knowledge when they find flaws. This leads to the collision of new and old knowledge in the brain, resulting in a heap of disorganized information that cannot be effectively applied. Therefore, we recommend that those who wish to learn trading should focus on position management and save the practice of adding and reducing positions until they have enough confidence and stability to consistently profit.
Position management is a challenging task, especially in the modules of adding and reducing positions. The calculations for opening and closing positions, as well as position sizing, can be done using a universal and simple method that can be applied to most trading systems. For instance, a single loss limit of no more than 1% of the principal and the position size can be reverse calculated through the acceptable loss amount. By utilizing this "universal and simple" position management method, combined with a trading system with a positive expected value, stable profits can be attained. However, adding and reducing positions are necessary to expand profits. Nonetheless, everything has two sides, and if not used correctly, adding and reducing positions can have the opposite effect. For example, adding positions may increase profits, but during volatile market conditions, it can erase existing profits and even turn floating profits into losses.
Experienced traders find their daily trading work easier because they are familiar with their trading systems and know what information they need to make trading decisions. They do not pay attention to irrelevant information, which contrasts sharply with novice traders. Novice traders are afraid of missing important information and are reluctant to disregard seemingly trading-related information. In contrast, experienced traders focus on developing their trading systems rather than executing them.
Developing a trading system is a highly intricate task and is not as simple as many beginners believe. They think that they can just read a few books, learn some tricks, and program a few technical indicators. Senior traders, on the other hand, are well aware of the challenges involved in developing a trading system, which includes determining the system's lifecycle.
The concept of the lifecycle of a trading system is easy to understand. Trading systems have a lifecycle like many natural phenomena, consisting of a profitable period and a losing period. If you only rely on "persistence," you may earn money initially, but eventually, you will likely lose it to the market. The saying "persistence is victory"/>/>/>/>