The academician of the coin circle continues to explain how to improve our trading awareness in the coin circle in the previous article. You can save it and watch it repeatedly. The content is not easy to write, thank you for reading.
The eighth key point to improve the trading awareness in the coin circle is to enhance our awareness of the importance of controlling emotions
First of all, we need to be clear that emotions are the most dominant factor affecting our psychological activities. They directly affect our trading decisions and operations by disturbing or controlling our minds. The academician of the coin circle first mentioned several emotions that have the greatest impact on our trading. Here, emotions mainly include panic, greed, arrogance, frustration, and panic when not trading, mainly stemming from the human nature of fearing losses and fearing risks.
Panic is the biggest negative impact on our contract trading, leading to operational errors and causing us to miss out on significant profit opportunities. Undeniably, panic can sometimes have a positive side. In the market, when public sentiment is extremely excited and frenzied, panic can prompt us to take timely profits and stay away from risks early, thereby avoiding the risk of a sharp decline. Therefore, in actual trading, we should balance the impact of this panic on our trading.
The second is the emotion of greed. The academician of the coin circle found through research that the emotion of greed mainly stems from the insatiable inner desires, the comparison psychology of comparison, and the drive for interests. The biggest negative impact of the emotion of greed on our trading is ignoring the risks in the market, leading to returning the profits earned to the market, and even causing serious losses many times.
So in actual trading, we need to maintain a clear mind, restrain excessive desires, discard the vanity of comparison, maintain a mindset of moderation and contentment. Only in this way can we avoid putting ourselves in dangerous situations in trading.
The third is the emotion of arrogance, which mainly stems from excessive self-confidence and self-worship. In trading, the biggest harm of arrogance to our trading in the coin circle is to subjectively judge and wishful thinking, thereby ignoring the existence of risks.
In the end, the market will use all means to eliminate your arrogance and even confidence completely. Therefore, in trading, we should focus on the market, not on ourselves, and maintain objective, calm, and sober analysis and operations.
The fourth is the emotion of frustration, which is more often caused by the blow of failure and setbacks. The biggest impact of the emotion of frustration on our trading is sustained huge losses, leading to the loss of confidence, and finally putting oneself in an unrecoverable predicament.
The academician of the coin circle has found over the years that many traders in the coin circle have ended up stopping here. What about you? The most effective way to overcome the emotion of frustration is to set aside trading, re-examine oneself and one's trading behavior, make corrections and adjustments, and maintain faith.
The last one is the emotion of gambling. Remember, the academician of the coin circle said that this emotion is the most harmful to our contract trading in the coin circle, and it is also the main culprit that puts traders in an irreparable situation. Because for newcomers to the coin circle, the origin of the gambling emotion in trading is the unwillingness to admit and accept the situation and reality of their own losses, and then using all their capital as chips to seek a greater profit with more uncertainty.
Therefore, in trading, we must acknowledge the results and feedback given by the market and accept them unconditionally. Therefore, always be on guard against your gambling emotions. Once this trend emerges, the academician of the coin circle suggests that giving up your own ideas and plans is the best choice. Treating this market as gambling is a sure way to lose in ten bets.
The ninth key point to improve our trading awareness in the coin circle is to enhance our understanding of the essence of trading rules
That is, the understanding of probability. Since the birth of the trading industry, no one has been able to accurately predict the market trend, including the academician of the coin circle, because any behavior and result in the market is the result of probability. The market may rise the next day, or it may fall. There is no 100% certainty.
So as traders, what the academician of the coin circle needs to do is to find profitable possibilities in the random price fluctuations. The core here is to make our own corresponding plans and results for the possibilities of the next day. It is not the specific result that is most important, but that any possible result in the market is within the scope of our preset plan. This way, our strategy and plan are controllable.
Understanding this logic, the academician of the coin circle breaks down probability in detail, which mainly includes three dimensions.
First is the understanding of winning rate. The academician of the coin circle can define this winning rate as the size of the number of wins under the same standard results. In trading, it is the ratio of the number of profitable times to the total number of trades.
The second is the understanding of the odds. The academician of the coin circle understands the odds as the ratio of profit to loss, also known as the risk-reward ratio. The risk-reward ratio is the ratio of the total profit amount to the total loss amount within a certain period of time. Here, it needs to be extended to understand, for example, the higher the risk-reward ratio, if the profit from a single trade can fully cover the losses from multiple trades, then the requirement for the winning rate may not be so high.
So this involves the issue of the trading system. If our trading system pursues higher odds, it often comes at the cost of sacrificing the winning rate, and vice versa. Therefore, in actual trading, the relationship between the winning rate and the odds is like playing on a seesaw, rising and falling, mutually restraining each other.
Understanding this logic, when setting up our own trading system, we must focus and make trade-offs based on our trading goals and personal characteristics. Whether to choose a higher winning rate or a higher risk-reward ratio, because this determines the overall direction of our trading system.
If the goal is to pursue a high winning rate, then we need to strictly control our desire to increase the target profit for each trade, and we need enduring and stable perseverance. If the goal is to pursue a high risk-reward ratio, then we must accept the reality of frequent small losses in the long term and persevere, which is a great test for an individual's trading mentality.
The third is to enhance the understanding of the bankruptcy rate. Here, the academician of the coin circle's understanding of the bankruptcy rate is our position management and capital management. Simply put, if you have absolute confidence in winning in the market in the long term, you must also weigh how many losses you can afford without going bankrupt.
We can use the example of tossing a coin to illustrate. Let's say both parties, A and B, each have 100 times the amount. We set a game rule, where A has an advantage in winning rate and odds, but if A loses, they need to pay B 1.1 times the amount. Although B's winning rate and odds are not as good as A's, if B loses, they only need to pay A 0.95 times the amount. Let's magnify the stakes for each. In this case, it is difficult to define the result of the game.
Because although A has an advantage in winning rate and odds, the bankruptcy rate is too high. It is very likely that A has already lost all their capital in the first round and has no capital to participate in the second round. The core meaning that the academician of the coin circle wants to express is that in every trade, no matter how confident we are in our winning odds in trading, we must not put all our capital on a single trading opportunity. And we must consider clearly, how much is the maximum loss we can bear each time? That is, our maximum bottom line for stop-loss, because when quantifying losses, the most basic premise of trading is to prioritize safety every time we open a position. This is why the academician of the coin circle often says that the essence of trading is like survival.
The tenth key point to improve our trading awareness in the coin circle is to enhance our understanding of the non-linear nature of trading profits and losses
The core idea expressed by the non-linearity of trading profits and losses is that not all trades will definitely make money, but in most cases, they will make money, and it is based on the basis of small losses and big gains. It is a result of probability statistics.
Here, the academician of the coin circle gives a detailed explanation using an example. Let's assume a person works in a company, and their average daily income is a fixed number. Assuming they do not miss a day in a month, their income increases with the increase in their working days, showing a straight line on a graph. This is because their income increases linearly with the increase in their working days, reflecting linearity.
The understanding of non-linearity. The academician of the coin circle uses playing mahjong as an example to explain. Let's assume a mahjong expert plays for 30 yuan every day, is present every day for a month, and the statistics of their daily income are as follows: on the first day, they earned 300 yuan, on the second day, they lost 80 yuan, on the third day, they lost 70 yuan, and on the fourth day, they earned 380 yuan. Continuously, the result is that they made a profit of 8000 yuan and a loss of 2000 yuan in a month, and ultimately, they netted 6000 yuan in a month.
If we present their daily income on a graph, their income does not show a straight line with the passage of time, but rather an unstable jumping state. However, in terms of their overall monthly income, it is positive, which is the understanding of non-linearity.
Understanding these two concepts as mentioned by the academician of the coin circle, we now have a basic understanding of the non-linearity of trading profits and losses. Therefore, in actual trading, we need to have a broader perspective on daily profits and losses, focusing on making more and losing less in each operation, as well as the stability and continuity of monthly profits.
The eleventh key point to improve our trading awareness in the coin circle is to enhance our understanding of the concept of "survival first"
The academician of the coin circle often says that the essence of trading is survival, and the core idea of "survival first" is that in any trade, preserving the capital is the primary consideration for our trading, because the capital is the foundation for our survival and continuous development in this market.
However, in actual trading, the academician of the coin circle found that the vast majority of traders ignore this fundamental condition, especially in the case of the liquidation crash of Bitcoin and Ethereum. The academician of the coin circle provided clear entry and stop-loss points, and also reminded everyone to take advantage of their high leverage and low position to operate, even if being liquidated is okay, it's just a small loss to exit.
Because human nature causes many people to be eager for quick success, and even pursue short-term wealth. It is precisely because of this eagerness for quick wealth that leads to frequent and heavy trading. In theory, frequent heavy trading can lead to two results. One situation is a large profit from a single trade. If there is a large profit from a single trade, according to the idea guiding behavior, behavior becomes a habit, and habit determines destiny. So, the next operation will still be a heavy one, and the final result is self-evident, it will definitely return to the starting point.
In hindsight, this large profit is actually a kind of extremely tempting trap. Because the concept of frequent heavy trading in the mind will ultimately lead us to a disastrous end in the coin circle market.
The other result is a large loss from a single trade. The academician of the coin circle uses mathematical reasoning to explain that if there is a 5% loss from a single trade, it would require a 5.26% profit in the future to balance it. If there is a 10% loss from a single trade, it would require an 11.11% profit in the future to balance it. The academician of the coin circle has found that for each loss, a higher profit base is needed to balance it.
The difficulty of this is naturally self-evident. Therefore, a large loss from a single trade in trading can significantly shrink our capital. Understanding these logics also helps us understand the academician of the coin circle's frequent statement that the essence of trading is survival.
I am the academician of the coin circle, a warrior who has always been protecting the "leeks". I wish my fans to achieve financial freedom in 2024. Let's go together!
Friendly reminder: The content above is created by the author only on the public account. The advertisements at the end of the article and in the comments section are not related to the author. Please discern carefully. Thank you for reading.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
