The profession of a trader may sound glamorous, but it is actually a tale of blood and tears. Since there is no such major in schools, most traders are self-taught and have grown through their own experiences.
I am inherently a very introverted person who does not enjoy interacting with others. Over a decade ago, while doing business in Africa, I was forced to encounter all sorts of people and situations, which made me even more resistant to the outside world.
I once thought that trading was my destiny because it only involved dealing with numbers, without the need for human contact. However, after so many years, I realized it was not that simple. In trading, you will face setbacks, confront your own human weaknesses, and need to accept your failures and mediocrity. It's a process of gradual destruction followed by rebirth, which is even more difficult than dealing with people.
It may sound quite dramatic, but that's the reality.
Phase One: Accumulating trading experience through losses, recognizing risk in pain.
Friends who have read my articles before should know that I had a particularly dark period in my early years, lasting for more than two years.
At that time, I was in a period of trading losses, and all the savings I had accumulated from years of struggle in Africa were lost, amounting to several million. When my peers were thriving, my life in my thirties suddenly returned to a state of destitution, which was very hard to accept.
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When you have nothing left to lose, you can only stop trading. It was then that my mind truly returned, and I truly gained the ability to think.
I have experienced all kinds of losses. At that time, I lost money on intraday trades, long-term trades, using moving averages, switching to Bollinger Bands, trading for one hour, and even switching to five minutes, still losing no matter what I did.
Sometimes I didn't set a stop loss, and after the order was trapped, I would add to the position to average the price, hoping that the market would rebound and I could break even, even making a profit. However, not all additional positions can be added at the right points; if done poorly, it could lead to being trapped again, with positions becoming heavier and floating losses growing larger. Watching the increasing loss amounts, my heart grew more and more fearful. The original determination to hold on became uncertain, and I just wanted to be free as soon as possible. In the end, I couldn't hold on any longer, admitted my loss, closed the position, and suffered a heavy loss.So, can I just not take a stop loss or add to my position? That's still not feasible. When faced with a one-way market, positions can be stuck for a long time, and holding onto losing trades can sour one's mindset. The more you trade in a rush, the more likely you are to make mistakes, and these mistakes can compound, leading to further losses.
What about not taking a stop loss and locking the position instead? It's easy to lock a trade, but it's much harder to unlock it. If not done properly, the locked positions can grow larger, eventually turning into a situation where you're locked in both directions, losing money and also incurring significant fees for unlocking and locking.
In the later stages of a losing streak, once I enter a trade without a stop loss, I instinctively recall my past experiences of losses due to not taking a stop loss, sending a chill down my spine.
Having been through this too many times, each lesson feels like a whip lashing against my body. I suddenly realize that even if I manage to escape this time, I will eventually lose it all again due to not taking a stop loss.
So, the risks in trading are not just talk; they can genuinely lead to financial ruin and destitution.
Risk awareness only truly became ingrained in me when I had lost all my money, and if I had come to my senses earlier, I wouldn't have had to spend so many years trying to make up for it.
Phase Two: I began to seek external help, learning from others' trading systems.
At that time, I was very confused about trading because I had experienced a prolonged period of losses, trying many methods, all of which resulted in losses.
I was completely unaware of the existence of trading systems, let alone money management. I didn't even know about position sizing, as if I were a primitive living in the technological age, utterly ignorant of these concepts.
At that time, I was also eager to break through my situation, so I attended several training courses and spent a lot of money. My financial situation was already very dire, so it was a desperate gamble.However, these training courses also provided me with some fragmented concepts, such as the composition of trading systems, how to form a trading system, what the rules of position management are, and the strengths and weaknesses between different systems, which was akin to opening the door to a new world for me.
In fact, everyone has their own "information cocoon," as people tend to focus on what interests them. For instance, when you scroll through short videos, the more you like something, the more recommendations you receive for similar content. Over time, this can lead to self-imposed confinement within a certain space, much like a silkworm encases itself in a cocoon, becoming increasingly disconnected from the outside world and mistakenly believing that one's own perceptions represent the broader reality, which is a truly frightening phenomenon.
At that time, I was also within my own cocoon, and there were very few self-media outlets. Attending training sessions was essentially the only place where I could hear different perspectives, and some of the knowledge was quite systematic and effective.
Additionally, forums, bulletin boards, blogs, and microblogs were popular at the time. I would search for trading-related posts on these platforms to learn from and interact with the authors when I had questions.
What moved me was that some bloggers were willing to answer my questions in great detail, resolving many of my doubts and greatly benefiting me. It was precisely because of such experiences that I became very willing to share my trading insights online, doing my best to answer every question. I believe that the feeling of not being able to find answers in trading is very lonely and painful. If someone is willing to lend a hand at such times, it's truly like a lifeline. I hope to pass on this spirit of mutual assistance.
Of course, the fastest phase of trading growth, apart from absorbing information from others, is largely due to one's own thinking and learning.
The content of trading education is quite dry, including basic technical analysis theories, knowledge of candlestick charts, and the use of technical indicators, among others. The material is not difficult but rather tedious, requiring one to read and understand it bit by bit, a process that has already eliminated most people.
Furthermore, there is the enhancement of trading cognition. I read a vast amount of books and articles explaining trading psychology, as well as some biographies.
Humans are creatures that love to compare. Seeing the hardships others have experienced and comparing them to our own pain seems to offer some comfort. Observing the resilience and self-discipline of others in the face of these hardships, in contrast to our own indulgence of desires in trading, suddenly makes us feel ashamed.
It is only then that we truly realize that making money is inherently difficult. Why should we think we can effortlessly earn huge profits in such a brutal market? How naive I was...If biographies can help one see their own shortcomings, then books that directly discuss trading psychology offer many concrete solutions. I have compared them one by one and tackled them one by one.
It is through a lot of information and knowledge from the outside world that I gradually formed my own understanding of trading.
Phase Three: Seeking inwardly, based on one's own abilities and cognition, to explore a trading path that belongs to oneself.
I don't know if anyone has read a book called "The Red Dust of the Sky," which contains an important viewpoint called "seeing the road but not taking it."
No matter how effective the information you get from the outside world, or how many successful people you have seen, you actually cannot completely replicate someone else's success, nor can you truly become an exact replica of someone else.
This is because all success depends on the right timing, the right place, and the right people. No success can be completely copied, and if you force yourself to imitate, you may end up in a disastrous situation.
So how can one find their own path to success?
It is to seek inwardly, based on one's own trading knowledge, to establish one's own trading system. All external information can be used for reference and consideration, but should not be copied blindly.
Just as I once inadvertently obtained a mature trading system, which selects currencies that fit the trend definition among 28 foreign exchange varieties at the 4-hour level, and then further confirms the varieties that have reached the right level of pullback. After these varieties have pulled back to the right level, switch to the 15-minute entry.
There were no issues at first when I started to implement it, but later I found that the frequency of trading signals at the 4-hour level was too low, and the correlation between foreign exchange varieties was high, so when there was no trend, they all moved in a range-bound manner.Although I traded 28 different varieties, there were 20 days without any trading signals. During those 20 days, I just sat and waited, my patience slowly being exhausted. Eventually, I couldn't bear it anymore, so I added a 1-hour trend trading logic as a supplement, thinking that I could execute two trading systems simultaneously. I thought that when there was no signal from the 4-hour trading system, I wouldn't just be idle. However, the success rate of 1-hour trend trading is low, and without a trending market, I ended up losing more than I gained. My mentality became anxious, and sometimes the two trading systems would conflict, making the situation more chaotic, and I found myself in a dead end again.
After the failure, I reflected, was there a problem with the 4-hour trading system? It was not problematic; it could be profitable in the long run. However, it had a low frequency of trades, and the distribution of trading opportunities was uneven. The long wait was really unbearable.
Was the mistake on my part? No, it wasn't, because this trading system was not originally mine. It didn't suit my trading style, and I didn't understand its profitability. It was inevitable that I couldn't persist with it.
After repeated thinking and summarizing, I finally realized that success cannot be simply copied. A trading system that works for others is based on their own objective conditions, and we can only learn from them. Traders must find their own path based on their own abilities and understanding.
A trading system has its own "temperament," such as the frequency of trades, the ratio of profit to loss, the proportion of positions, the success rate, and so on. We traders also have our own "temperament," whether we are impatient or patient, our preferences in trading, the indicators we are comfortable with, the varieties we like, and so on.
The probability of directly adopting someone else's system and it not working well is high, so I began to modify my own trading system. I first adjusted the time frame, then improved the entry and exit points, stop losses, and take profits. For each technical aspect, I tested various possibilities.
For example, when comparing stop losses, is a larger level stop loss better, or a smaller level stop loss better? Is a smaller level stop loss better at the secondary low point or at the lowest point? When using a stop loss at the secondary low point, is a 2:1 profit-to-loss ratio better, or a 3:1 ratio better? I controlled each variable and tested and modified them bit by bit.
After one or two years of adjustment and testing, I finally created my own trading system, a one-hour level system that focuses on the bigger picture while trading the smaller details.I have finished recounting my experiences, and I would like to summarize two key points for traders on their growth path:
1. Intelligent traders are those who know how to curb their desires, skip the first stage of losses, and directly enter the second and third stages. We are now living in an era of information explosion, where learning is very convenient. There are numerous people on the internet who are willing to share information. As long as you are willing to search and study, you can quickly get into the groove. It might be unstable in the early stages, and there might not be profits, but you will never allow yourself to fall into a situation of significant losses. It is important to understand that many people, after suffering substantial losses, ruin their mindset, develop habitual trading thinking, and in their haste to recover, they only end up losing more and more, making it difficult to turn things around. Therefore, avoiding this big pitfall is crucial.
2. To forge one's own path in trading, one must invest their time and energy. Relying solely on others is not enough, and merely discussing strategies on paper is also insufficient. This is why I always emphasize the importance of reviewing past trades and practicing with simulated accounts. When you verify the effectiveness of your trading strategies in historical or future market scenarios, you will experience many setbacks and failures. It is from these real failures that you can realize something and make adjustments.
There is a significant passage in "On Practice" that states: "Due to the discovery of unforeseen circumstances in practice, it is common for thoughts, theories, plans, and programs to be partially changed, and it also happens that they are entirely changed. That is to say, the originally established thoughts, theories, plans, and programs may partially or entirely not align with reality, and it is possible that some parts are wrong or everything is wrong. Many times, one must experience repeated failures before correcting erroneous understandings and achieving conformity with the regularity of the objective process."
Before you engage in practice, you might take things for granted, easily trust that others' ideas are correct, or believe that your own trading ideas are right. However, when you put them into practice, you will encounter many unforeseen situations that will completely change your thoughts. Both previously incorrect and correct perceptions will be overturned, and these experienced facts become your valuable assets. This is the meaning of seeking truth from within.