A few days ago, I was chatting with some traders in the office, and we each shared some of the silly things we did when we first started trading. As we talked, we realized that many of our experiences were similar, and there are still many people going through what we did in the past. Although it's easy to talk about now, at the time when we were going through it, we all felt a lot of pain and difficulty. And I know there are still many people who are going through it and can't get out.
So today, I'm going to write down some of the things we've experienced for everyone to refer to, to help you avoid these pitfalls and get on the right trading track faster.
1. Joining multiple discussion groups
Many people like to join some discussion groups when they trade. A bunch of people chat in there, some discuss the market, some show their trades, and some teach others how to trade. Sometimes when you lose money in a trade, you feel like talking with everyone can be a comfort.
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When I first started trading, I also liked to join these discussion groups. Because I felt lonely trading by myself, and sometimes when I lost money, I was panicked. Was it just me, or was everyone like this?
After I joined these groups, I found that many people were making profits, and there were a lot of "trading masters" in the group. They could explain everything logically and were good at analyzing the market.
In the early days, I remember there was a master in the group who traded gold. He often showed his profitable trades, and they were all heavy or full position trades. His capital was not large, about $3,000, and he would open five positions at a time. The gold market fluctuation ten years ago was much larger than it is now. Sometimes he could double his money in just a few minutes of market movement.At that time, I was still incurring continuous losses, and I was extremely envious seeing his profits. I did some calculations myself: if I also opened a position with 3000 USD for 5 lots, and if it doubled in one day, with 22 trading days in a month, it would amount to over 40,000 USD, which is equivalent to more than 300,000 RMB. If I did this for a year or two, I would have no need to do anything else.
After he posted his delivery slips for seven or eight days in a row, I finally couldn't resist and started trading myself. The result was a series of losses for half a month. Every day, I would be dazed by the loss, unwilling to accept it, and immediately re-invest money. After depositing, I would immediately start trading, and this cycle was unending.
What was the problem?
It's similar to the live broadcast rooms that everyone likes to visit; once you're in, everyone is buying, the host is shouting on stage, creating a tense atmosphere, and a crowd below is scrambling to buy, feeling like they would lose out if they didn't buy. But who actually benefits? Think carefully.
The communication group also has this feeling, where everyone seems to be making a profit, and you are the only one losing. You feel afraid, anxious, and angry, leading to an extremely unstable mentality and irrational behavior in trading.
At such times, if you encounter a few people giving advice, you might think that these people don't understand as much as you do, yet they dare to speak out of turn. So, you argue with them, and sometimes even get into heated debates.
I once read a book called "The Crowd: A Study of the Popular Mind," which talks about the psychology of the masses. I found that people become easily influenced, impulsive, paranoid, and emotional when they gather in groups, more susceptible to suggestions and more likely to believe others.
In the early years in these communication groups, I was influenced by many people's trading philosophies, such as:
(1) Trading with a heavy position feels great
(2) Trading should always be profitable, and there should be no losses(3) Trading doesn't require learning; it's just a very simple thing.
(4) The XX indicator is more effective than another indicator.
(5) Those who follow trades and make profits can earn money.
However, after believing in these philosophies, no matter what I did, I kept losing. For a whole year or two, I was stuck in trading losses and couldn't find a way out.
Later, as time passed, I had achieved profitability. Looking back at those people in the group and their trading philosophies, I found that many had short-term high profits, desperately showing off their delivery slips, but remaining silent when they suffered losses, eventually disappearing without a trace. Most people follow this trajectory.
After I started making profits, my state was to brew a cup of tea at home, check the market when there was a trading signal, and drink tea when there wasn't; if there was something to do, I'd go to the office, but if not, I'd rather read a book or write something.
I refuse to discuss trading with most people unless someone sincerely seeks advice. Because the money in my account tells me what's right, and I don't need to prove to others that I'm right.
So, if you're still in these groups, I suggest you leave. For those who trade, it's important to have a calm mind.
2. Thinking full-time trading is prestigious
People often ask me, "Brother Ba, I don't want to do anything but trade now. Can I quit my job to trade full-time?"I was the same back then, running a business in medical devices, but once I started trading, I couldn't care less about anything else and just wanted to drop everything to trade.
Moreover, influenced by some movies and TV dramas at the time, I thought that trading was all about finance, with several large screens set up every day, facing the mysterious K-line market, and money would just come pouring in.
When I first started trading, I made 30,000 US dollars in just two weeks, and I was already floating on air, arranging various dinners, telling everyone I met that I was in finance, a trader, and at every dinner, I would inevitably "command the mountains and rivers," talking about trends, investments, and so on.
Looking back at myself from that time, I was quite foolish, really quite foolish.
There are also people who often see all kinds of "wealth myths," such as a domestic futures master who turned 6 million into 2 billion, Xu Xiang who started from scratch and made tens of billions, and someone who turned 2,000 into tens of millions, and so on.
So most people have come to believe:
(1) Trading is very simple
(2) Money comes quickly in trading
As a result, some people start to think that working diligently is a waste of time. Since money comes so fast in the financial market, why not quit their jobs and become full-time traders?
What is the reality?Trading is by no means glamorous; the process of trading is extremely tedious, especially when it comes to building a trading system. Once you've formulated a trading strategy, you have to list all the criteria and details, test them one by one, and optimize them. You'll end up with a vast amount of data, and your daily tasks involve statistics, analysis, and probability optimization.
After all this, you may arrive at a profitable trading system. But that's not the end of it. When you use the trading system in actual trades, encountering periods of decline can be frustrating. Do you stick with it or give up? It's a struggle against your own human nature.
Every day, you're faced with a bunch of numbers, candlestick charts, and your routine is to wait, execute, execute, wait—boring, frustrating, with your heart pounding as the candlestick charts rise and fall, even when you make mistakes.
This is the truest life of a full-time trader.
Now, let's talk about the wealth myths in the market.
Of course, there are incredibly talented individuals in this world, those who are gifted, understand human nature, and have resources at their disposal.
But there's a phenomenon called "survivorship bias," which I'm not sure everyone has heard of.
Successful people are more likely to speak up because no one wants to shout to the world in their moments of failure: "I'm a loser, I've lost a lot of money, I'm a loser!"
So what people see is that the financial market is full of winners, making them feel like they also have a chance, that they too can achieve success, that there are many opportunities in the financial market.But what about the reality?
China has hundreds of millions of stock investors, and by the end of 2019, there were 1.42 million futures accounts, yet the number of legendary profit-makers could be counted on ten fingers.
Therefore, before considering full-time trading, one must take these factors into account and not be blindly led into becoming a full-time trader by market information and inaccurate self-assessment.
3. Choosing the wrong platform
The first account of my trading career was opened on a Hong Kong platform called "Northern Gold and Silver X."
The trading software I used at the time was very counterfeit; it was not the MT4 software at all, and it only allowed trading in gold and silver. In addition to the normal spread, there was an extra $50 fee per lot, making the trading cost for one lot of gold $100.
As a novice in trading, I didn't understand anything about fees, slippage, or hidden points, and I was cheated out of a lot of money. In the past two years, through communication with many netizens, I have found that many beginners do not know how to choose a platform and are often cheated, just like I was in the early days.
There are several such situations:
(1) The account has a high spread and is charged a high fee.
(2) The account is charged hidden points, resulting in paying much more than the normal transaction every time one buys or sells.(3) When encountering a platform with severe slippage, there is still some room before the stop loss is triggered, yet the order is inexplicably stopped out, while the profit-taking is much slower.
(4) What's more serious is encountering a fraudulent platform, where you cannot withdraw funds, or even being scammed by a platform that demands various reasons for recharging when you try to withdraw, such as paying a deposit, freezing due to incorrect bank card input, and so on.
Choosing a platform is indeed a very complex matter, not just referring to some evaluations on the market, because these things can be tampered with. It really takes some years of experience in this industry to know which platform is truly user-friendly and has a good conscience.
I have talked a lot about platforms before, and I won't elaborate here. If you have questions about platform selection, you can ask me privately, or you can directly choose the platform I am currently using.
4. Not treating money as money when trading
There was a phase in my trading where I only kept $1,000 in my account for trading. At that time, I thought the amount was not much, so I took heavy positions, thinking that if I lost it all, it would be fine, and if I made a profit, I would continue to add to my position.
Once the $1,000 was lost, I would deposit another $1,000. Sometimes, when I found what I thought was a great trading opportunity, after opening a position, I would not set a stop loss. If I was wrong and got a margin call, it would be a loss of $1,000, much like betting on the size of a bet.
For example, when gold tested the round number of 1,800, I would go in with one hand on a $1,000 account. If the market rebounded, I would make a little profit, or else I would go straight to a margin call.
This kind of $1,000 "gambling game" is very thrilling, no need to think, no need to restrain, betting on the moving average today, betting on the lower Bollinger Band tomorrow, and the pressure position of the previous high can also be a bet. Anyway, there are just too many opportunities to bet on the chart, with wins and losses, it's really very enjoyable.
But what are the consequences?The losses far outweighed the gains, and I fell in love with this sensation. Once I started trading, I couldn't stop, always thinking that since I didn't have much money anyway, it wasn't a big deal. It wasn't until I later tallied up and realized I had lost fifty to sixty thousand US dollars in just two months that I became aware of the seriousness of the situation.
However, in reality, many people do not calculate how much they have actually lost but instead become lost in this "pleasure," unable to extricate themselves.
Many friends trade part-time, with their regular salary income possibly only amounting to a few thousand or just over ten thousand. Some have to smile at their clients, while others have to watch their bosses' expressions, with daily work pressures also being quite high. They receive such a small amount of money, and they still live frugally.
But in trading, they feel they can make money, so they become particularly generous, taking out one or two thousand US dollars for a trade in an instant, slapping their thighs and making decisions as if the money you lose isn't the hard-earned cash but just a number.
Many people do not treat their own money as money, thinking that if the amount is small, they can gamble it all away without regret. If that's the case, it would be just as pleasurable to find a river and throw a stack of cash into it.
So, in trading, do not think that you can do whatever you want just because the amount is small, nor should you think that losing money is no big deal. When you have this mindset and are unable to free yourself from the pleasure of small transactions, it marks the beginning of endless losses.
5. Becoming addicted to trading
When I first started trading, it was like a new world had opened up. With a few clicks of the mouse and watching the fluctuating K-lines, money would suddenly pour in. When I made a profit, I felt an overwhelming sense of achievement, and when I was about to lose, my heart would race. Short-term trading doesn't require much waiting, and I could make many trades in a single day.
Trading is incredibly thrilling and exhilarating!
At that time, I could sit in front of the computer for 24 hours a day, trading non-stop, sometimes even forgetting to eat and sleep. If I fell asleep, if I had a pending order, I could get up in the middle of the night to check the order on the computer, waiting for the trading result.At that time, I had a girlfriend whom I had been dating for 5 years. We had met each other's parents and were already preparing for marriage. However, because of my involvement in trading, I lost interest in everything, completely neglecting her and her feelings, to the point where I even lost interest in our sex life.
I was in a state of constant anxiety and irritability, like a powder keg, ready to explode at the slightest trading setback.
This kind of life went on for a year, eroding the 5-year relationship between us, and we broke up. I have been single ever since.
What are the signs of being addicted to trading?
You become a different person, losing the ability to think normally, to communicate emotionally, to control your emotions, and you lose interest in everything else.
If you exhibit such signs, remember, remember to stop and seriously consider whether you should step away from trading.
What should you do?
First, you need to understand that trading is not something that can be mastered overnight. You cannot transform from a novice trader into a mature and successful one instantly.
When you first start trading, do not overdo it. You can allocate 1-2 hours a day to learn about trading, review past trades, and gradually begin to trade. Do not have overly high expectations for trading.
Do not follow my old path, starting full-time trading without any understanding, hoping to achieve financial freedom through trading. The higher the expectations, the deeper you get involved, and the easier it is to lose your way.Secondly, you must perform your own job well and reasonably arrange your trading time without mutual interference. You can allocate time after work, for example, scheduling 2-3 hours each evening for intraday trading, and avoid watching the market at other times. Treat trading as a means of asset growth and as a form of financial management.
You can engage in trades with a larger time frame, such as above the 4-hour level, and only make a few trades a month. Once the order is entered, there is no need to pay too much attention, thus saving energy.
If you cannot manage the relationship between your work, life, emotions, and trading, then it is best not to trade.
6. Haphazardly learning to trade
In the early stages of learning to trade, I was at a loss, not knowing where to start. Wanting to learn about candlestick charts, I searched for "candlestick" on shopping platforms, and hundreds of books came up. I bought all the top 20. Upon reviewing them, I found the information to be vast and complex, overwhelming.
There are hundreds of technical indicators for trading, and the combinations of these indicators are even more numerous. After learning the indicators, you still need to build a trading system. Once the trading system is in place, there are also various trading philosophies to consider.
There is a plethora of information online, especially free articles and videos, with many scattered and diverse knowledge points. You may have read and learned them all, but you might not know how to integrate them, nor which ones are correct or incorrect, or which information can truly help you profit.
On the path of trading, there is no shortage of diligent learners, but if you learn in the wrong direction or cannot find effective information amidst the vast array of data, the time it takes for you to achieve profitability may be more than ten times that of others.
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