I worked as a trader as soon as I graduated from Shanghai Jiao Tong University in 1993. At that time, I came to China Nonferrous Metal Materials Corporation as a trader.
There is a particularly interesting sentence, “It was the best of times, it was the worst of times.” I thought it was the best of times in my day, and I regret that our young people may not have the opportunities we had.
However, as Professor Hu Yuyue mentioned just now, with the improvement of the futures law, especially our analysts, I see the handsome men and women today are all the managers of our hedge funds in the future. I can see that the future is going to be great. For us personally, it may be the best time and the worst time at any point.
When I got into the futures business, it was a very segregated time, and our traders were free to trade all kinds of things on the floor. That was 1993, 1994.
As a new trader, I was purely a feeler. It was the easiest time to trade. The most ignorant time was probably the easiest time.
I didn’t know how to make it, maybe it was a talent, so I thought it was easy to make money. In 1995, I became the director of the trading Department. In fact, I thought it was a big risk.
I think it’s a pretty scary thing, looking back on it, so my advice to people is, if you’re going to be a trading analyst, you better have one or two blowouts.
I probably read some books at this time, but I couldn’t go all the way. In 1998, I had my first stock explosion. Because you are a feeling person, the better you feel, the more confident you will be.
At this time and your physical condition, mood will have a great relationship, read some foreign books, found that we have to study the fundamentals.
Because I have been making copper, copper is the most difficult variety to make in the whole industry, and it is also the variety that all the masters are most eager to conquer. Up to now, it should be said that the top private equity leaders in the industry are fighting with copper, and we must kill it.
Then I studied the fundamentals and went to the warehouse every day. At that time, I didn’t know the supply and demand balance, I didn’t understand the global supply chain.
However, I went to the warehouse every day, and the inventory continued to increase from 40,000 tons to more than 100,000 tons. I am the first-hand information. The general manager of non-ferrous metals said that after the copper arrived, was sold and burst the warehouse, when the copper burst the warehouse to 1,600 or 1,700 dollars, the copper inventory increased significantly.
Fundamentals are unreliable, so I began to read technical analysis books at this time. I remember that the most helpful books were Morphological Analysis by Liu Mengxiong, Technical Analysis Theory by John Murphy, Wave Theory, K-chart, and periodic analysis. After studying a lot of them, I felt that I had found the true meaning and finally found the obsession that I had been beaten when I was looking at fundamentals.
The main technical analysis is different, a head into the door of technical analysis.
Very lucky indeed.
I probably from 1995 to 1998, there was a period of time by technical analysis, relying on the two most simple things, namely the head and shoulder top and the head and shoulder bottom, for several years, I helped big customers, helped the first big customer outside the market, relying on a head and shoulder top for several years, and made a lot of money.
I remember it was in 2001 when I had accumulated the accumulation to a certain extent. At that time, the research on waves was very deep and basically all the research was in place. At the end of 2000, there was a big top nearby, and I kept it every day.
The technical analysis, I don’t know if you understand it, is called zigzag consolidation.
A look, there is a zig-zag consolidation, the consolidation when it falls, first hedge, when it falls, the zig-zag has been in place, the cycle cycle indicating the bottom has been in sight.
This zig-zag back cover failed, turned into a zig-zag back cover absorb, and that was the second near-blowout.
The most thrilling thing was the third time. In that round, I learned a top secret information. Maybe we did it for a long time.
Basically I don’t care about making and losing money, basically all figured out, so I’m not tired.
Third blast I have a top secret piece of information.
The difference between research and trading So through these three experiences, if you’re going to commit to being an analyst, you can have an obsession, you stick to your beliefs.
If you’re going to be a transactional researcher, I don’t think you should be obsessive, you don’t want to be obsessive about your beliefs, because the only thing that’s right is the market.
If you find that your trade is wrong, it must be that your whole philosophy is wrong. For example, our analysts now pay a lot of attention to, in the last two years, our analysts have a tendency to pay a lot of attention to the study of the so-called balance sheet. Is the balance sheet important?
Of course, if you do trade, do not cling to the balance sheet, in this period of time our iron ore from 370 yuan to 435 pieces, still rising, this is a continuous rebound, about 20%, what happened to our balance sheet?
Maybe not, but the strength of this 20% rally, you as a trading talent, this round is enough to kill your clients or yourself.
One more, why does this happen?
If we’re looking at commodities, the first thing you need to understand is which commodities are going to distort and change the balance sheet, and which commodities are not going to be appropriate to distort the balance sheet.
For example, there is no supply and demand balance sheet for copper. The whole copper market has been a manipulated market in recent years. When I know that many Chinese people are selling, I know that the market is going to reverse.
Indeed, copper does not need a lot of capital to operate, and gold, gold is operating?
Of course not, but gold and the stock market, will be blown up by the wind, in the gold round of bull, I already feel wrong, but I absolutely dare not empty, because at this time someone said 5,000 dollars, because gold this thing if everyone thinks it will rise, everyone takes a piece of gold, where is gold?
So can the fundamentals of gold be studied clearly?
It’s impossible to study.
So be sure to think about which varieties you can study clearly, which varieties can’t study clearly, which varieties of the market will last for many years, which is a year.
Take our agricultural products.
If you look at some commodities like soybeans, corn, if you look at the market, if it’s a bull market this year, it’s going to be a very aggressive bull market, if it’s a bear market this year, it’s going to be a flat bear market. Why?
Because few people stock up on soy, because it has no value, because it can be planted year after year, its quantity is infinite.
The second is not suitable for stockpiling, you stockpiling tens of millions of tons of soybeans how to deal with, the second year soybeans came out again.
Therefore, it is very important to know which varieties of fundamentals and balance sheets can be known, and which varieties do not necessarily represent the future trading direction.
From “art” to “Tao”, I talked about my experience. Basically, after I went through all of them, from the feeling school, the fundamentals school and then the technology school, I found that we need to have the whole logic and concept of investment, that is, we need to have some “Tao”.
If we are all researchers, first of all, you must have a philosophical idea, which is a “Tao”, so we can speak for ourselves now, or I can tell you, those who are successful, no matter what kind of investment, people who have done futures, basically do all kinds of investment can be relatively easy, because the “Tao” is the same.
For example, when I buy real estate in recent years, I always get the lowest price every time. I can’t make a mistake when I sell a house, because it is better than our futures. What is this logic?
It’s completely connected.
For example, the current house, we went to the United States last year as Fudan graduate students, you should go to the United States to buy a house compared with the house in Shanghai, based on a big logic of arbitrage, the price is undervalued.
Including where people are moving, how many people are moving to the United States, what houses are supported by, by people, there is a big logical body, so we need to build a big logical thinking.
Speaking of philosophy, I would like to recommend to you some good theories or books I have read, Wave Theory, which I find very interesting. Many people laugh when hearing this. Indeed, it is a very controversial theory.
Because many people who follow the wave theory to trade, find it is a fraud. In fact, the Wave Theory is not “art” at all, it is “Tao”.
Wave Theory teaches you the way to think. What does Wave Theory mean?
The market works only when it is in its natural state.
So a lot of people take the wave theory to set trading, very interesting, especially some do the stock brothers, do the stock with the wave theory to set, wave theory is a pure natural state, will be effective, it is a pure nature, but it is very meaningful for your life.
Three waves rise and five waves fall, which tells you not to lose heart when you meet setbacks. In fact, it is a big philosophical idea, and it has some details that you need to read silently. For example, when a river flows quietly, it is the wave theory, but someone throws a stone into it, the wave theory will become invalid.
It’s normal when it doesn’t work.
There is Soros’s “Alchemy”, I read the first time also did not understand, and then slowly read to understand.
Some varieties, we just talked about gold, Soros said the main principle is that the market is always wrong, he said wrong and we just said the market is always right, I don’t know how you understand, I said the market is always right, you are in it and if you do wrong, you lose money, no matter who operates it, the rules are wrong, you lose money is losing money.
Therefore, the existing market is always correct. When we were in that chaotic era, the spot price of plywood and adzetta, 40 yuan for plywood, reached more than 70 yuan. The total production of adzetta was 80,000 tons, and the price was whatever you wanted.
But you said that the red beans in my market are not worth the price, you can’t correct this reason with it, so the market is always right.
What does Soros mean by that?
The market is wrong most of the time, for example, the gold market has risen to 1,900 yuan, and now looking at this wrong, including the current stock market, if rational investors know that the stock market has gone crazy, you will find that it is not normal, but Soros’s words are very good to explain this phenomenon, when all people, I think some stories in our history,
For example, the tulip story, the South Sea property bubble, when this bubble occurs, a self-fulfilling value, when everybody thinks this thing is going to go up, you have to understand the psychology, it’s not a commodity, it’s far from your supply and demand balance sheet, don’t have this obsession.
Another is Buffett’s The Snowball as I finally feel I am an investor, not a gambler idea.
A few years ago, when we were trading, I was thinking about how 20 million would become 40 million tomorrow, and then 160 million. I think it would be better to double it one day. Our futures are 5% leverage.
In fact, if you honestly follow this “way” to do, it may be far more than the current wealth, really take this industry as a kind of investment to do, slowly build your system, that is, you can understand every investment is very clear.
When the Shanghai Stock Exchange was launched, the price of gold was 30% higher than that of the United States. When the white sugar was launched, the total tax on imported gold was more than 1000 yuan/jin, and there was no need to worry when the price difference reached. I think the financial industry, I have done a lot of messy industries, I think the financial industry is the easiest industry for wealth liberalization.
Our research talents often talk about a big balance sheet, a big trend, excess, but if you give specific strategies to clients in the future, I think the trigger point is very important. We just mentioned some increments and variables, that is, when we have new increments and variables, it is the point of our trading entry.
This is the point that we’re going to provide to the client which means that when you’re doing your strategy, you’re going to focus on this point.
Discipline The last thing, the most important thing about our long-term survival in this market, is discipline and in the end, that means the most important thing, when you go from being a researcher to being a trader, I think I didn’t understand the fundamentals at first, and then I didn’t understand the technicals, and then I thought I understood everything, but I was almost blown out, and the most important thing is discipline,
If you move from research to strategy, trading, and form a habit that you stop your losses every time you enter, that is discipline.
A lot of people say that I know all about discipline, but every time you go in and cut your losses, that’s the real discipline.
The second loss, you first have to ask yourself can you stop the loss, if this variety is not secondary trading, how do you stop the loss, that is why we later moved to arbitrage, global trading, because through global trading, I can solve the stop loss, or we do more arbitrage and hedging can solve the stop loss.
So this is my own experience, and I’m still immature, and I’ll tell you, I think how I grew up building some philosophy, some art, how to understand the rules, and now building your own discipline, because everybody is different, the four things I just said, everybody is different, you build your own system, you build your own system.
Finally, I would like to recommend some books to you. I think there are a lot of books on the market at present, so don’t read the Chinese books, because they are busy making money. I suggest you read more books about mature markets in the United States, and you must get to know them, such as The Story of Hedge Funds, The Failure of Long-Term Capital, The Theory of Reflexivity, and The Snowball.
I want us to build a snowball concept, what is the benefit?
There is a difference between snowballing and us getting rich. What is it?
If you stick to the snowball concept, your life is basically a very happy one, probably growing every year.
I know a lot of traders who, for ten years, lose their annual salary of one million, and suddenly one day make two hundred million, this kind of life style I personally don’t think is very good, why?
Exultation and hysteria.
Then annual wealth growth, as a rational researcher, I think is a relatively good path for the future.
(Speech by Tao Yang, Shanghai Architectural Investment Group, at the Analyst Night of the 9th China Futures Analyst Forum)
