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To make successful trades, you must understand the eight key characteristics of the market!

阿海
阿海
07-10

Those who believe that risk is directly proportional to profit have a gambler's mindset at heart, a notion that poisons the market and investors.

Apart from the intrinsic uncertainty of the market, there are some more specific characteristics: inclusivity; the relativity of predictability and unpredictability; the uncertainty of transaction costs and profits; the contradictory unity of stability and contingency in the market; the proportionality of profit and trading ability; the combination of randomness and order; the insolubility of perfect trading; and, in the long term, the disproportionality of risk and profit.

1. The Market's Inclusivity

The market's inclusivity is demonstrated by its complexity, which is a result of the diversity in traders' trading philosophies, principles, models, and methods.

This inclusivity means the market can accommodate all existing and future trading ideas, theories, principles, and methods. Different trading ideas, theories, principles, and methods possess value and can adapt to specific aspects of the market, thereby having the potential for profitability.

At the same time, no single trading idea, theory, principle, or method can adapt to all aspects of the market; each has its weaknesses and limitations. Perfect trading does not exist. The market can accept everything while also negating everything, leading to two extreme emotions and attitudes: blind optimism or utter pessimism. Optimists believe the market is great with limitless wealth, while pessimists think no method can yield profit, making the market untouchable.

The inclusivity of the market creates a colorful landscape, which can easily confuse investors who struggle to find a trade model that suits them. They might emulate others' methods when they see them making money but quickly switch strategies after losses, never finding their direction.

The market's inclusivity also tells us that others' methods may not suit you, and your methods may not suit others. Everyone has different pursuits and views. No one should impose their methods on another. The belief that one's approach is superior while negating others is a sign of immaturity.

2. The Relativity of Predictability and Unpredictability

The market is a dialectical unity of predictability and unpredictability. Both predictability and unpredictability are relative. Generally, trends are predictable, while the fluctuations that form trends are not. Trends are difficult to manipulate, whereas fluctuations are more manipulable; trends are formed by market rationality, fluctuations by emotions and psychology, with rationality being relatively stable and emotions being random.

We must avoid the extremes of predictability and unpredictability. Those who trade rationally can follow trends, while those who rely on intuition can tackle fluctuations. Investors can choose their path accordingly.

3. The Uncertainty of Transaction Costs and Profits

Investors cannot budget their transaction costs and profits for a year like they do with spot trades. Transaction costs include fees and losses from stop-loss orders. You may have a maximum loss limit, but the exact cost within this range is indeterminable. Transaction profits are entirely dependent on the market conditions, your trading proficiency, and various other factors, making them uncertain.

The market's uncertainty directly leads to the uncertainty of profits. Investors should be mentally prepared for this.

4. The Contradictory Unity of Stability and Contingency in the Market

As previously mentioned, trend stability is the foundation and rationale for the market's existence. However, the market also contains a significant degree of contingency. Changes in policy, outbreaks of war, natural disasters, and other events can bring about a lot of contingency. For trading, contingencies can either be windfalls or disasters, but they are unavoidable. Investors must face and endure them.

5. The Proportionality of Profit and Trading Ability

If your profits come from luck or contingency, or if they exceed your ability level, the market will eventually reclaim them, as fairness is intrinsic to the market, unless you cease trading. When entering the market, carefully consider your level and avoid setting unrealistic goals to prevent undue disappointment.

If you possess trading ability, profits will naturally follow. One cannot trade solely on luck forever; profits and trading ability are wholly proportional. The market is the fairest judge. Losses cannot be blamed on the market, and profits are not due to its favor. They are what you deserve.

6. The Combination of Randomness and Order

Trends exhibit orderliness, while fluctuations are random. Disordered fluctuations form orderly trends. This is the market's composition. Whether you pursue trends or fluctuations is entirely your decision, based on what type of trading suits you. Don't lose sight of yourself by envying others' gains.

7. The Insolubility of Perfect Trading

The market's characteristics dictate the insolubility of perfect trading. Pursuing perfection means pursuing failure because the direction of your pursuit is fundamentally wrong. With the wrong direction, all subsequent efforts are futile. Any theory or model has flaws, and there are no trades without losses. Trading consists of both gains and losses. Pursuing perfection fragments trading, leading to a destructive blow from the market.

Investors should abandon the idea of perfect trading and accept moderate losses as the cost of gaining profits. Don't set up barriers for perfect trades that no one can overcome; not even Soros can.

8. In the Long Term, Risk and Profit are Disproportional

Is risk proportional to profit in the trading market? Perhaps this seems true in the short term, but our view is not limited to one or two days; we look at the long term. Taking on high risks cannot sustain long-term trading because a single loss could be fatal.

The belief that risk and profit are proportional stems from a gambler's mindset and poisons the market and investors. Only low risk can sustain long-term development, which is genuine investment behavior. Accounts taking high risks are short-lived. Wealth accrues gradually, bit by bit.

For more related trades, please contact CWG Ahai;

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Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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