For investors, the most talked about topic is what point they should enter the market, what position they should choose to hold when entering the market, and how to deal with the position in their hands in the future market, which is the so-called investment. Three steps, but investors rarely consider whether the current market environment is suitable for entry? Is it the best time to enter? Are the risks and rewards proportional when entering the market? Especially when the above three questions are answered in the negative, investors start to get confused.
But when the market fluctuates sharply, investors' psychology becomes impetuous, and the impulse to trade has the upper hand, especially when the price fluctuation is developing in the direction they expected, the impulse to trade can no longer be restrained. The sound, the horn of battle sounded. At this time, traders will no longer think about winning or losing. The most important thing is to have a position in their hands, not to have no position, and never let the fluctuation of the market have nothing to do with them. In this case, even if the investor realizes the profit, the method is not advisable. The investment process does not only include analyzing market trends, choosing entry points, and grasping the timing of exits. Rest should also be indispensable in the investment process. To paraphrase a famous saying: If you can’t rest, you can’t invest.
So under what circumstances do investors need to stop trading and "recuperate"?
1. When the market is in a sideways state with no trend and no law
For investors, the market is nothing more than three states: rising, falling, and sideways. When the market is in a rising or falling trend, the price movement has an obvious trend, and the smooth running track allows us to realize profits only by passively following the market. And when the market is in a sideways state, the price does not show directional movement. At this time, whether you choose to go long or short, there is an element of gambling, and each has a 50% probability of following the right direction. So at this time, our best choice is to choose to rest, to calmly observe the market movement during the time period when trading is stopped, and to actively follow up when the market sends a signal to grab due profits.
2. When the market risk is uncontrollable
For mature traders, the first priority in trading is not the research and judgment of the direction of market operation, but risk management. Risk management is the only and most effective tool for market traders to survive in the market. Therefore, only by learning risk management can one's own investment path go further. Some risks can be controlled by traders themselves, such as stop loss, stop profit, entry capital settings, etc., but some risks cannot be controlled by themselves, such as natural disasters, wars, etc. At this time, we have to pass Effective means to avoid yourself being hit hard in such risks. How to trade during the time period when such risks are likely to occur? The simplest answer is - rest, short positions. Although this made us lose the opportunity to obtain huge profits, we also lost the bad luck of being eliminated by the market.
3. The transaction has repeatedly gone wrong
The market is like water, traders are swimmers, and swimmers have different water properties, but no matter whether the water content is high or low, there is a danger of being choked by the water. As the saying goes, how can you not get your shoes wet when you often walk by the river? The same is true for participating in market transactions. Since you participate in transactions, you will lose money. Multiple losses will make your mentality worse, so that you have to trade frequently, expecting to use more profits to hedge loss. But a bad mentality will make the transaction more difficult. At this time, all you have to do is to forget your previous transactions, go to rest, summarize, and find a new opportunity to start again.
For traders in the foreign exchange market, the state of mind during rest can be summed up in five words, that is, nostalgia of alienation, because nostalgia is unwilling to alienate the market, and while alienating the market, they are still nostalgic for it. But what I want to say is that if you are still nostalgic for the market, then alienate it for a while, otherwise you will not have the mind to be nostalgic for it in the future.
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