It is often said that cognition determines behavior. Sometimes, people become very obsessed with refining their trading techniques, believing that they must reach a certain level of technical proficiency to achieve profitability. In fact, this is a reversal of priorities. Most people fail to make a profit not because their techniques are poor, but because their cognition is inadequate or misguided. Without an external force to push them, it is difficult for them to engage in self-reflection and self-correction.

For instance, if you believe that making money in trading is easy and that you possess extraordinary trading talent, you might think of yourself as a trading genius. In this case, you would not perceive trading as risky, and your trading actions would be aggressive and unrestrained. Even substantial losses may not be enough to change your self-perception.

Alternatively, if you have experienced the sweetness of making money without stopping a trade and then seeing the market turn around in your favor, you might conclude that stopping losses is not important and that the market has a chance of turning around. As a result, you might approach each trade with a mentality of luck, essentially gambling on the market's movements with each transaction.

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Trading is not like other industries, where there are various rules and regulations to constrain your behavior. On the contrary, it is a zero-sum game driven by human nature. The difference between making money and not making money lies in who can control human nature and who is controlled by it.

Having experienced trading failures and the process of getting back on track, which involved a very painful period of self-reflection and self-correction, I would like to share today how I rebuilt my cognition.

1: Self-study (Theoretical Learning)

The pioneers plant the trees, and the successors enjoy the shade. This is why I love reading so much. When I was at the bottom of the trading valley, I couldn't share my bitterness with anyone, and there was nothing else I could do. Reading books was a cost-free activity, so I immersed myself in them.

Especially with trading books, you will find it quite amazing that your thoughts and behaviors in trading have been documented by others, and you are not alone in this. Most people are in the same boat.

Some books even offer solutions, as if the authors are talking to you, telling you that your failure is not an isolated case and that there are ways to solve it. You feel comforted and can gradually find ways to address the problems.As you read more and more books, you will gradually find that many books cover similar content. Whether it's the technical points you need to learn, everyone's trading behaviors, or the psychology and cognition of trading, there are many common points. These commonalities often represent the core aspects of trading.

For example, most trading books will emphasize the importance of risk, telling you that risk comes before profit. As your mind is continuously impacted by this perspective, you will slowly form a philosophy: prioritize risk before discussing profit, so strict stop-loss measures are a must.

Thus, you will see your own ridiculous trading behaviors in various books, round after round, understand why you have become a "chop," and then correct your self-awareness.

I have also shared on my public account (Eight-Digit Garden) more than a dozen books that I believe are particularly good in the field of trading, and I have written many reading notes. Interested friends can look for them to read.

2: Technical Review (Testing Theories)

Reading books alone cannot solve practical problems. You might understand the concepts in your head, but your hands may not. When trading in real combat, you might unconsciously revert to your old state. This is when deliberate practice is extremely necessary.

For instance, the book emphasizes the importance of stop-loss orders, but in live trading, you often encounter fake breakouts where the market comes back after your order is stopped out. So, is it really not possible to stop-loss? Is the book right or wrong?

At this point, we can randomly select a trading strategy, not set a stop-loss, and conduct decades of backtesting in a backtesting software. After extensive backtesting, you will find that even if the short-term issue of fake breakouts is resolved, you will always encounter one-sided markets. Once your order is trapped, it never comes back, and you end up being deeply stuck for a long time, or even blowing up your account, rendering all previous profits void.

At this time, you will have a profound realization: stop-loss is not about solving a short-term profit or loss issue, but about long-term interests. It is like your car insurance; having it does not mean you will have an accident, but if you do, it will leave you unharmed.

So all your doubts in trading, new insights after reading books, and doubts about technical methods can be answered in backtesting or simulation trading. Moreover, when you personally test something, you will have enough trust in it, and you won't need to ask others for the answers to these questions.Additionally, in terms of cognition, it is crucial to avoid shortsightedness. Whether you are reading books or conducting your own technical verifications, a certain magnitude is required to obtain a relatively accurate answer. For instance, if you read a book and take its conclusions as absolute truth, you might be acting on flawed perspectives without realizing it, which could lead to another pitfall. Or, in the case of trading techniques, you might review a few months of trades and find that during that period, the market was range-bound, and not stopping losses would indeed make you money. Consequently, you might conclude that not stopping losses is fine, but if you haven't tested your strategy during a trending market, you could be forming a mistaken belief.

Therefore, if we are going to undertake something, we should either not do it at all or do it well. Take the time to immerse yourself, whether it's through reading or researching and testing. The patience you invest in spending time will be reflected in the outcomes of your trading.