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The perception of trading masters: What really makes trading make a lot of money

2024-08-17

In "Reminiscences of a Stock Operator," the author Jesse Livermore once said something to this effect:

After making and losing millions of dollars on Wall Street, I realized that my correct market predictions did not make me a lot of money. What made me a lot of money was persistence. It's not surprising to be right about the market; many people start by going long in a bull market and short in a bear market. But many people, including me and those around me, buy and sell at the exact prices where the largest profits are made. So, being right did not make us a lot of money. Only those who are right and persist in trading can make a lot of money.

American trading giant Charlie Dennis earns 95% of his profits from 5% of his trading times each year! And these 5% of trading times in currency pair trading is the art of waiting. The reason why 95% of trading times cannot make a lot of profits or even lose money is the panic of losing money, which makes people violate principles, specifically manifested in frequent stop-loss cutting and frequent trading.

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Long-term and short-term, artists and engineers

If short-term traders are artists, then long-term traders are engineers. Because artists are full of excitement and passion in their artistic creation, while engineers need long-term efforts to build projects, unexpected situations will occur in the process, and the process is full of hardships and challenges.

Long-term traders chase trends, they do not pay attention to the intraday fluctuations of prices, nor do they care how the market will go the next day, only focusing on whether the trend is about to end.

The patience of long-term traders in holding positions is not something that ordinary investors can understand or bear. There is a misunderstanding in the market that long-term traders can hold positions for a long time because they can predict the trend and end point of the market, so they are confident in holding for a long time. In fact, it is not the case. Long-term traders also do not know the future trend of the market, they just follow the trend in compliance with discipline.

Like long-term traders, holding positions in compliance with discipline requires enduring four kinds of pain:

Pain 1: The market's large fluctuations can easily eat up most of the profits of the original position;Translate the following passage into English:

Pain 2: One must give up many assured profit opportunities in exchange for long-term profits;

Pain 3: There are fewer opportunities for long-term trading, and the market spends most of the year fluctuating. During these fluctuations, long-term traders sometimes suffer continuous losses, and often it's the case that they switch from holding a profitable position to a loss, which is a great torment;

Pain 4: The most important thing in long-term trading is to maintain objectivity and discipline, and in many cases, one must give up their own vivid thoughts and judgments.

These four pains are unbearable for many people. It can be said that long-term profits are the result of a long and torturous market experience. Therefore, although long-term trading is theoretically more suitable for the majority of investors because it emphasizes rationality and objectivity, it deprives users of the joy of daily trading and forms a kind of lonely and restrained trading behavior, somewhat like an ascetic monk. This austerity causes many people to rejoin the ranks of short-term trading.

The process of long-term trading is roughly as follows: slowly buy low-priced trading varieties first, then patiently wait, and then sell at a high price later; buy low-priced trading products again, and so on in a cycle. Its biggest characteristic is to lose small and win big, not to focus on the ratio of wins and losses, but to pay attention to the quality of the wins and losses, which is also the most essential difference between it and short-term trading.

Should you choose long-term or short-term trading? This choice should not be difficult. If you want to make a lot of money in the market, you need to learn how to hold positions, because the ability to hold positions affects your ability to make a lot of money in trading.