Cognition - Trading - Capital Cryptocurrency Exchange Platform

Series on Market Cognition—Subjective and Objective

Market uncertainty includes the fact that the market is always changing, encompassing everything that could happen and everything that is in flux. Based on this understanding, traders are asked to meet two requirements: first, to view the market and themselves objectively; second, to accept all possibilities.

Today, we focus on how to objectively view ourselves and the market, and we will discuss accepting all possibilities later.

What is subjective: Subjective refers to opinions about the market and any conclusions drawn from technical analysis.

What is objective: The actual, real movement of the market.

First, objectively view yourself. This relates to the earlier discussion of knowing yourself and your opponent. Viewing yourself objectively means your positioning is more reasonable, and you should have an accurate assessment of your abilities, qualities, character, and professional cultivation. Do not overestimate your abilities, do not be overconfident, and strive to be pragmatic and truthful. Avoid subjective guesses, arrogance, preconceived notions, and overthinking. Your desires should match your capabilities, and you should be able to control your emotions and behaviors. Achieve unity of knowledge and action. Being able to evaluate yourself objectively is crucial for improving your trading performance.

Next, view the market objectively. Traders must interpret the market objectively, with all analysis based on the actual market movements.

Objectively interpreting the market is not about subjective guesses or assumptions like “I think the market should move this way” or “the market is supposed to do this.” It requires dedicating your entire mind and body to the market, free of emotions, biases, and human weaknesses. All analysis must align with the market’s actual movements. When the market moves left, you should adjust your thoughts and analysis accordingly until they match the market’s real trend. The market is never wrong; only you are. Admitting and correcting mistakes promptly is an essential quality for good trading.

Trading cognition—What is the goal of profit?

Entering the capital market is always for profit. Unlike other markets, we have a unique profit goal: we pursue sustained and stable profits. Not reckless gains or overnight riches. As trend traders, we never set profit targets ourselves; the market dictates how much profit is possible. The amount of profit is what the market gives us. Many retail traders like to set their own profit goals, such as “I want to make this much profit this month.” Such behavior indicates a lack of understanding of the market because profit is a byproduct of risk control and a gift from the market. We can only focus on executing good trades; the outcome is beyond our control. Therefore, setting any profit target yourself is a mistake.

Series on Trading Cognition—The Original Intention of Trading

What is our original purpose for trading in the capital market?

1. Is it for excitement, sensation, or experience? No. Because comfortable trading might be wrong; painful trading can be correct if it leads to profit. Stop-losses may cause pain but are correct. Trading is inherently against human nature. Pursuing reckless gains will inevitably lead to margin calls and losses.

2. Is it to prove oneself? No. Many people excel in other industries and believe they can succeed in the capital market as well, but that’s not always true. Many real-world examples show not everyone is suited for trading.

3. Is it for interest? No. If you treat trading merely as a game for fun, it will turn against you. Trading is a serious and rigorous endeavor; relying solely on interest is insufficient.

4. Is it for others’ recognition or admiration? No. Trading is a solitary activity, not something to impress others.

5. Is it for family? No. There was a trader who did it for his family, but his family abandoned him. When he succeeded, he gave up everything.

These seemingly correct initial motivations are not suitable for this market. The only purpose of entering the market is to make money. Capital is driven by profit-seeking. Often, traders stray further from their original purpose, forgetting why they started. Some dedicate their entire lives to it, like a king building a luxurious tomb to commemorate his queen, only to have the coffin placed elsewhere because it didn’t match the harmony. We must constantly examine why we are in this market. Losing sight of the original purpose will lead us astray.

Why do I believe that the most correct choice for a retail trader is to follow the trend?

From the Snowball column by Ma Zhaoxuebao

I used to be someone who disliked accepting defeat. By chance, I got involved in the stock market, full of confidence, but I ended up battered and bruised. Because I was unwilling to accept defeat, I learned many methods—fundamentals, value investing, indicators, coding formulas, various strategies. At that time, I knew every detail about fundamentals, value, indicators, formulas, and strategies. But after trying, I realized I knew nothing. The best method for a retail trader is to follow the trend. Later, I met an enlightened teacher who guided me onto the right path. Looking back, I feel very fortunate because many discussions among fellow traders revolve around questions I once obsessively studied and chased. Everyone seems to be omniscient, knowing everything, even understanding the intentions of major funds. Achieving this took great effort and time, beyond ordinary efforts, which I understand. But it’s ultimately useless. I sincerely recommend retail traders to learn about trend following—it’s a method that will overturn your entire understanding. You must study systematically. If you want to enter the capital market, this is a shortcut. A shortcut doesn’t mean quick; it’s the fastest route to success.

Having suffered many losses, I now understand what doesn’t work; having found a way to profit, I know what does. Trend following, an ancient and classic investment method, truly aligns with the capital market. I have gained immensely from it. That’s why I am eager to share this theory, philosophy, and method—to help more retail traders avoid detours and find their own path.

Series on Market Cognition—Market Trends

Understanding market trends and grasping their patterns and characteristics are essential skills for an excellent trader. Only by identifying different market conditions and establishing appropriate strategies for each can one succeed. Choosing the right target is a crucial step for subsequent market movements. Once the target is selected, the subsequent market behavior becomes complex, requiring a comprehensive ability to respond.

Market selection principles: choose simple and straightforward trends, avoid participating in choppy or consolidating markets.

Trading within patterns involves participating in adjustments, such as selling more during rebounds or declines, or buying more during dips or rallies.

Types of special market conditions:

1. Black Swan: The most unpredictable and difficult to grasp market event.

2. Rapid Market: Fast and fierce upward or downward movements.

3. Repeated Breakouts: Markets that repeatedly break through support or resistance levels.

4. Sideways Volatility: Range-bound, directionless markets.

5. Pattern-based Markets

6. Simple and straightforward trends

7. Rollercoaster Markets

8. Trend Markets: Entry points for adding positions, hedging strategies

9. Declining Markets

10. Slow Sliding Markets

11. High-level Wide-range Fluctuations: Buy on dips, sell on rallies