The core misconception that many contract traders fall into is becoming obsessed with 'predicting market direction,' turning trading into a gamble. However, the essence of trading is a game of probabilities; there is no trading method with a 100% success rate. The underlying logic of long-term profitability in contracts is to build a system that allows the 'advantage of profitability probability' to remain effective in the long run, rather than pursuing precise hits in every trade. JPMorgan's AI model has long verified that even with a win rate of only 52%, as long as the risk-reward ratio is maintained at 3.8:1, it can achieve stable profits in the long term.
The core of reconstructing probability logic is to create a trading system with positive expected value. This system must clearly define the entire process rules for opening positions, holding positions, and taking profits, allowing trading to be free from subjective emotional interference. When opening positions, one must abandon following the crowd; just like Wang Lu's selection of varieties, focus on three key dimensions: volatility, trend, and position to filter targets, prioritizing high-volatility varieties with the VIX index above the 20-day K-line while confirming that the target is in the bottom area and the trend is clear. This selection logic essentially improves the foundation of the win rate when opening positions.
The design of position holding and profit-taking rules directly determines the profit-loss ratio. Wang Lu's tiered short-selling strategy has considerable reference value: the most positions are in the in-the-money tier, the second tier has fewer, and the least in the third tier. As the underlying asset rises, dynamically adjust positions, closing out-of-the-money contracts for profit, and then move to the vicinity of the at-the-money position to continue earning time value. This approach not only ensures the continuity of profits but also controls risk through position gradients. When taking profits, it is crucial to avoid greed; a trailing stop strategy can be adopted. When profits reach twice the entry risk, move the stop-loss to the cost line, and when profits exceed 10%, appropriately reduce positions, allowing profits to run while firmly locking in the gains already made.
The key to probabilistic thinking is accepting the inevitability of 'losses within the system.' No trading system can achieve a perfect success rate, even the top quantitative strategies in the market will experience consecutive losses. The difference between long-term winners and losers lies in the former's understanding that a single loss is a normal manifestation of probability and will not deny the entire system due to one failure; while the latter will abandon the rules due to emotional fluctuations, falling back into the trap of blindly betting on direction. Reconstructing probabilistic logic means shifting from 'pursuing every profit' to 'ensuring long-term profits,' from 'predicting the market' to 'following probability,' which is fundamentally the leap from losses to profits in contract trading.
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