I have a friend who has been trading foreign exchange for 4 years, from blindness to skill, from concept to system, from strategy to psychology.
He learned all kinds of technical theories and knew all kinds of trading concepts well. In the eyes of others, he was a master of foreign exchange trading. In fact, I knew that he was a real loser.
In fact, many of the so-called foreign exchange masters are like this.
A real profit, when trading the brain is not ‘trend’, ‘shock’, ‘top’, ‘bottom’ these concepts.
Not to mention the theoretical indicators.
The essence of trading is to “trade in the moment”. When you are in the moment, the conceptual theoretical stuff disappears from your mind.
In Buddhist terms, it is the ‘present moment’ or ‘fixed state’.
In Taoist words, it is’ Wuwei ‘.
There is such an allusion in The Three Kingdoms period – Zhu Ge weepy and Ma Su.
The main content is that Zhuge Liang appointed Ma Jieting, and repeatedly told Ma Jieting is small, but it is important, if we lose Jieting, our army will be defeated.
Ma Su did not listen to Zhuge Liang’s instruction to deploy troops by mountains and rivers, the troops deployed far away from the water on the street pavilion.
At that time, Deputy General Wang Ping put forward, “There is no water source in the street Pavilion and no food road. If the Wei army besieges the Street Pavilion and cuts off the water source and food road, the Shu army will collapse without a fight.”
Ma Su knows the art of war well.
But he did not listen to the advice, but rather complacent said: “Commanding a commanding position, invincible, death and survival, this is the common sense of the military, I will deploy the army on the mountain, this is the secret of victory.”
Later things we all know, Ma Su street Pavilion.
The point of this example is that many times, similar “common sense” and “theory” in trading work against you.
A lot of times “theory” doesn’t work.
A few simple examples: 1. “Head and shoulder shape, break the neck line to make a single, the goal is the vertical distance to the head of the neck line” but you will rarely see any mention of when the form fails, in fact, there is very little standard head and shoulder shape on the market.
2. “How low is high up?” But you rarely see books that define which position is high and which position is low.
3. “A cloud cap is a sign that a market may be over.” But you can’t see where the market will go after that and how long the cloud cap will last.
4. “Things don’t move as expected because fundamental news is priced in ahead of time.” But you don’t see when you start to move and when you finish.
5. MACD can be used to judge the divergence, “the MACD gold fork is bullish, and the dead fork is bearish”. But in fact, after the entry of MACD gold fork and the dead fork, the basic market has almost gone, and the departure of MACD from the market is often followed by a divergence.
All of these are the most common theories you’ll see, but the “but” is also the most common question you’ll ask when you’re actually making your order.
It is often said that the competition between investment market experts is not a contest of “technical level”, but a contest of “investment theory”.
However, we often find that the so-called “classical theory” does not work in many cases.
Why is that?
02 Four reasons for “theory failure” ¢Ù Lack of execution In trading, there are thousands of ways to interpret a particular theory.
And because of that, you can see that even though they’re all using the same theory, different people get different returns.
After all, using the same theory, there is a huge efficiency gap between 0 and 100%.
Execution is a key factor in how much you can “monetise” with a particular theory.
At this point, ask yourself two questions: “Have you translated textbook theory into a set of rules and methods?”
“Is there repeated training in the practice of this theory?”
I don’t know if you feel this way. If you were given a picture and asked to follow it, you might think it is very simple.
But when it comes to drawing, it doesn’t work.
This is probably because you didn’t notice all the details in the picture. You didn’t notice the Angle between the curve and the horizontal plane. You didn’t notice whether the nose and eyes were in the same plane or whether the two eyes were the same size.
For example, Buffett’s “greed when others are afraid”, many people either understand it as the trend to increase the position, the result is a single shoulder all the way;
Or crudely understood as “I sing more when others are bearish”, live a set of value investment theory as their own short-term speculation.
In fact, the correct method should be to thoroughly understand the logic and applicable methods of the theory, and internalize a theory to form a set of thinking framework suitable for your personal habits.
The third point is that markets are full of great uncertainty and few rules to follow.
The age-old theories of trading are not the laws of the market, but the inventions of previous investors.
This means that no matter how elaborate your trading plan is, it is impossible to predict what will happen next.
There is no absolute explanation for the market, just a probability and possibility.
Of course, it’s better to have a theory than a hunch.
But a big part of what theory means at the operational level is to build confidence that the market can be manipulated without getting lost in K-lines and volatility.
¢Ü Some “theories” are not theories at all. Finally, it is possible that the “theories” you have been using are just accidental and correct conclusions, and cannot be used as “theories” to guide trading all the time.
How to identify “invalid” theories?
Here is a simple example. The following is a trader’s trading method on the combination of volume and K line.
This is typically preconceived and at first glance very much fits the logic of the K-line pattern plus volume, but this graph is in the past perfect tense.
The thing about the past perfect is that you can find 100% of what you want to see.
I’m going to put a screenshot of it using the present continuous.
There is a big difference between looking at the market every moment as if it were in the present continuous tense and looking at it in the past perfect tense to see if it fits the conclusion you want to reach.
This is the psychological phenomenon of “confirmation bias” that we’ve all read about in the past, where the human brain takes in information that most people want to see.
There’s a 100% chance that you can pick a rooster out of a flock of chickens, and if you want to, you can find one.
You want to find a fundamental reason for the end of the market after the fact, also 100% find out, as long as you want to find, the brain will always give you a suitable explanation;
But when the market happens, you may have the wrong explanation.
Many theories are very clear, but they can be “reasonable fallacies.” See Part 1 for examples.
Everyone has heard of the market pricing in fundamental news ahead of time, but in practice we have found that it is impossible to follow this view because you don’t know when the market has started to move and when it has already moved.
Of course, it is not ruled out that some trading veterans have a strong sense of the market, can successfully grasp the moment when the market has run out of expectations.
But the probability of such premonitions is very small, and in such cases the conclusion cannot be called a rule.
In fact, it is easy to determine whether a concept is workable or not.
For example, if you play chess, you will not be in danger of a hundred battles. If you play chess, you will not be in danger of a hundred battles. You can understand the saying, but if you play chess with others, you will still lose.
But if you tell me that the other person’s first move is to hit the soldier in front of me, and I’m going to vault, then there’s a clear guide, a lot clearer.
(3) High-probability coincidence in judgment I believe that we all have this feeling, why my analysis is so accurate, but still lost?
Part of this is confirmation bias (being impressed with what you were right about and not remembering what you were wrong about).
And part of it is that your call looks like the market is moving, but it’s actually a high-probability coincidence of the market.
The market either goes up or down, and there’s only a 50% chance you’re wrong.
You arbitrarily judge the point within the market volatility limits will be not too far from the actual market.
Without technology, you don’t know why you’re right, and it’s hard to actually get in and out of position.
