Most traders don’t understand what trading strategies are, and they only focus on “how can they help me make big money” for technical analysis methods. This kind of thinking lies in education. When school teachers teach us knowledge, they usually use scientific methods to help us infer the results.
Everything is in order and the steps are clear. We feel that everything is not complicated, but we have forgotten how many detours and frustrations scientists have made when reaching these conclusions. In the absence of the experimental spirit of education, we are concerned about the conclusion, at least the conclusion can guarantee how many points we test.
But in the stock market, it is completely different, and the conclusion cannot guarantee how much money we make. All technical analysis theories have been observed for a long time, discovering problems at any time, and finding ways to solve them. Constantly perfecting the theory through data and logic, and finally, after repeated interpretations of the market, a theory that is not 100% accurate is reached.
The creators of these theories can deeply understand the background behind the theories. Know what kind of technology can be used at what time. And most of the hastily technical analysis learners are not interested in understanding, and they turn a deaf ear to the advice of “there is no 100% accurate theory”. Constantly experimenting with various theories in different market environments, they have succeeded, and they have lost their minds. Once it doesn’t work well, it will be completely overthrown.
Investors who are unwilling to study in-depth have overturned countless classic theories, but have never overthrown their stupid minds.
Study and practice, just like a farmer farming. When they first entered the market, people usually told them they would have a good harvest, so they carried their wallets and tried to cultivate them. Before plowing, people who are interested will learn a lot of planting knowledge, but if the seeds are not planted in the ground, there will never be a harvest. Even if the seeds are planted, there may not be a harvest.
It is difficult for a fresh farmer to grasp the exact time for planting, let alone what kind of crops the land is suitable for planting. Coupled with changes in the wind and clouds, rain and hail raged, it is normal for the harvest to be poor. Even in the second or third year, there will still be little gain. Many people lost their confidence and hope in this and eventually left their savings in this land.
Technical analysis is just like this. Some investors are not confident to follow the main trend and maybe more enamored with the operation of the small trend. For this reason, the main trend that would be ignored, resulted in a large loss, so the analysis method was shaken.
I would imagine that if I used XX theory, I could escape this time; if I listened to Master XX, I could earn more. This constantly vacillating mentality has caused many stockholders to reincarnate in the loss-earning-losing-earning cycle, and they have never been able to find a technical analysis theory that convinces them.
What technical analysis pursues is not an inevitability,
But a probability. Technical analysis methods require in-depth understanding to be truly effective or to explain when they will be effective. In this market constructed by countless factors, we are also one of the small interfering factors. It is the judgment and decision-making in our brain that determines the loss and profit, not the technical analysis method. The technical analysis method is a measuring ruler, just a tool. How useful this tool can depend entirely on the knowledge of the user of the tool. Profit depends on hard work, sweat, thinking, and sincerity.
In addition, technical analysis methods are only an auxiliary tool for market judgments. Trading requires the help of tools, but tools cannot make trading decisions for us. Trading relies on our practical experience and our response to market movements, that is, trading strategies. A good trading strategy can control our investment risks and also help us correct loopholes in technical analysis. A good trading strategy can help us formulate orderly transactions and increase our profits.
What is the trading strategy?
First Example of Trading Strategies
For example, I am in the north of Beijing, planning to walk to Tiananmen Square. I don’t have a GPS, map, or guide. Technical analysis can tell us the direction, tell us to go south, and point out the direction of Tiananmen. If there is no strategy, our path may be very tortuous, and the probability of reaching the goal is not high.
Second Example of Trading
For example, many short-term speculators who are accustomed to selling high and buying low cannot pick up their chips when they throw up their chips in a bull market. Some long-term investors have accurately found the direction and obtained the bargaining chips, but the profits made in the end are far from satisfactory.
I know the direction of Tiananmen, but the journey is tortuous. When walking, define the big road, road, and a small road. Take more confirmed roads and try to avoid middle and small roads. If you encounter a fork in the road that must be taken, make a plan to turn back in time if you have not found the correct road after going through a few intersections. More importantly, we must use effective methods to keep our eyes on the south. When finding a way in a fork road, we must measure the number of steps in the east and west to estimate the deviation.
The above steps may sound cumbersome, but the purpose is actually very simple, that is, to keep an eye on the direction and go to the end. And there are correction methods and quantitative calculation methods. The trading strategies are the method of modification and the perfection of details to ensure that you can achieve your goals as much as possible. Going to the Tiananmen Square metaphor, the strategy may not guarantee the goal, but it can effectively reduce the deviation of technical analysis.
Types of trading strategy
The trading strategy is not one type, it should be adjusted according to the trader’s personality, technical methods, and investment style. For example, short-term trading strategies should be formulated in conjunction with the analysis of long-term graphics, and the details of the compensation are mainly to control the correction steps after errors.
The long-term strategy will be more complicated. On the one hand, the formulation of the strategy must consider the accuracy of the top and bottom judgments, on the other hand, it must also take into account the long-term security of funds and the strategy of ultimately achieving profits.
Before the in-depth discussion, I made a definition: “investor” and “speculator”. To be clear, the market does not have a pure speculator, nor a pure investor. Speculators will also take into account the stimulus of the news, investors can not only rely on dividend income to satisfy themselves.
Generally speaking, investors tend to focus on medium and long-term operations, while speculators pay more attention to the efficiency of capital use and tend to operate in the short-term or even ultra-short-term operations. Obviously, the strategies adopted by the two investment methods must be different. In addition, there is also a trading method in the modern market called Swing trading strategies.
The trading strategies are designed in the computer and the transaction is performed entirely by the computer. It can be said that it is a thorough strategy trader. At present, it is relatively mature abroad.