From 200,000 to 387 million, 'Master Trader' Zhou Wei says: Success in futures trading requires enduring hardship!
Introduction:
Zhou Wei, nicknamed 'Simple Happiness', is a subjective trading expert who selects varieties and directions based on fundamentals. In nearly four years of competition, he has accumulated profits of 387 million yuan and won the title of 'Master Trader' in the national futures real trading competition.
Having engaged in stock trading for 27 years and futures trading for 16 years, I only look at fundamentals and not technicals. After experiencing six drawdowns of over 50%, I gradually formed my own profit-making method.
From 200,000 to over 300 million, I made over 100 million in lithium carbonate.
He once said, 'In futures trading, it ultimately comes down to self-discipline; I always regard preserving capital as the first principle of investment. As for how much I can earn, that depends on the market.'
Today, we have compiled Zhou Wei's trading philosophy based on public information for fellow traders to reference and study!
Zhou Wei:
He began investing in stocks in 1996 during his freshman year.
In 2006, I made 200,000 in the stock bull market.
He started futures investment in March 2007.
He only started making profits after 2015, turning an initial capital of 800,000 into 4 million. He started full-time investing in April 2016.
Around June 1, 2017, he seized the opportunity of avian influenza to heavily go long on eggs, doubling his capital.
In 2017, he won the championship in the subjective trading group of a national futures competition.
Around the Qingming Festival in 2018, he seized the opportunity of frost damage to apples and heavily went long, earning more than double.
Before the 2020 Spring Festival, I went long on stock index futures, heavily profiting more than double.
In 2021, he heavily went long on soda ash, with positions reaching over 3000 lots, earning over 10 million yuan.
In 2021, he won the title of 'Master Trader' in a national real trading competition.
In 2022, I lost 2 million in stock index trading but made substantial profits by shorting nickel during the nickel incident.
1
Starting with stocks, specializing in futures.
1. Early experiences
Zhou Wei's connection with investing began in his university years. In his freshman year, he borrowed 10,000 yuan from home to trade stocks. During that time, his entire university life was almost spent trading stocks, neglecting his studies, to the extent that Zhou Wei could only find a not-so-good job after graduation. Because of this, he became more determined to focus solely on trading for the rest of his life.
In 2006, the stock market ushered in a bull market. Zhou Wei successfully increased his funds to 200,000, relying on years of accumulation and keen judgment. This achievement was a recognition of his years of hard work and also a new starting point.
In March 2007, Zhou Wei was not satisfied with the achievements in the stock market and decided to switch to the futures market. He felt that making money in stocks was a bit slow, so he began to try futures trading that allowed leverage and T+0.
2. After several setbacks, I was reborn.
The complexity of the futures market far exceeded Zhou Wei's imagination, having experienced four significant losses. In the second year of trading futures, Zhou Wei suffered a massive loss due to a wrong judgment of the market trend, leading to a considerable loss of funds. At that time, he had less than 10,000 left of all his possessions, and Zhou Wei felt hopeless.
But life must continue; after reflecting on his losses, he asked his parents and relatives for help, found a job first, and then borrowed 200,000 from his parents to continue trading, gradually making a comeback.
Later, there were also several significant losses, but Zhou Wei never dared to give up easily.
I reviewed the reasons for my first failure and began to strengthen my research on macroeconomic data and industry dynamics, striving to improve my fundamental analysis skills.
Reflecting on the second major blow, it was because I did not strictly implement the stop-loss strategy in trading, which led to escalating losses. Since then, I have strictly set stop-loss points in every trade to ensure risks are within controllable limits. Just as Zhou Wei said, 'When profits exceed 10% of occupied funds, I will start to increase positions. If the fundamental judgment is wrong or losses exceed 5% of total capital, I will reduce positions.'
The third and fourth losses made Zhou Wei realize the crucial role of mentality and emotional management in futures trading. He recognized that maintaining calm and rationality in the face of market fluctuations is immensely important. Excessive greed and fear often lead to wrong decisions; only by controlling one's emotions can wise trading choices be made.
It is precisely because of previous failures that Zhou Wei has established his current trading system: 'Fundamental analysis + Fund management', as well as the second most important aspect, emotional management.
Zhou Wei found a trading system and investment strategy that suited him. He focuses on fundamental analysis, deeply studying the impact of market supply and demand and policy changes on futures prices; at the same time, he combines technical analysis to judge the short-term trends of the market through charts and indicators.
In terms of risk control, Zhou Wei always adheres to strict fund management principles. He never concentrates all his funds on one commodity but reduces risk through diversified investments. He strictly controls the risk exposure of each trade to ensure that even in extreme market fluctuations, he does not suffer catastrophic losses.
After 2015, Zhou Wei's trading began to gradually stabilize and generate profits. He seized multiple opportunities in the market and achieved rapid asset growth.
In April 2016, he resolutely resigned from his job and devoted himself fully to futures investment.
2
In 2024, government bond drawdown exceeded 50%.
Zhou Wei's most recent drawdown was at the end of September 2024. Before the end of September, Zhou Wei earned about 150 million (in September), but by September 30, there was a massive drawdown, losing 210 million in just a few days. This loss mainly occurred in the 30-year government bonds, with Zhou Wei's funds withdrawing by over 50% in five days.
Regarding why I incurred losses, here is Zhou Wei's own account:
The main reason for the significant drop in 30-year government bonds is that the stock market surged in the past few days. The rise at the end of September was the most rapid in the stock market in 30 years, especially the CSI 1000 reached its daily limit on September 30, and on October 8, it also opened at a limit up. In the face of such a rapid increase, many investors sold off bonds and shifted to the stock market, causing bonds to plummet and stocks to soar.
Looking back at the profit and loss chart of the competition, in September, just as the high-rise was about to host guests, the building collapsed. I have been reflecting on why there was such a large drawdown, especially during those days when the stock market soared. Many friends around me doubled their profits in stock indices, and one friend who did the best was fully long in the CSI 1000 and quadrupled his investment in just three days.
Moreover, stock index futures are a type of commodity I am very familiar with. Not only did I miss out on this great profit opportunity, but I also faced significant losses.
First of all, I think I was not hardworking enough. From the competition account of about 40 million after lithium carbonate was listed last year, by September 23 of this year, in about 14 months, the account accumulated a profit of 580 million, earning about 15 times in 14 months. After experiencing a long period of relatively smooth operation, I made considerable profits, and my mentality changed a bit, becoming a little complacent and not working as hard as before. I relaxed significantly in the time spent on trading, analysis of fundamentals, and adherence to trading principles, which I believe is the main reason.
Secondly, the fund management was not strict enough. I stipulated in my fund management strategy that when the fund drawdown reaches 20%, regardless of how certain I am about my fundamental judgment, I must start to reduce my positions.
On the day the 30-year government bonds peaked, three ministries held a joint press conference in the morning, and the central bank announced favorable news for government bonds—interest rate cuts and possible reserve requirement ratio cuts.
But when government bonds surged to 116, the China Securities Regulatory Commission released several favorable news for the stock market, and the stock market began to rise. I saw the stock market rise rapidly, so I reduced my holdings in government bonds. However, the next day, I found that government bonds stabilized and the stock index fell back in the afternoon after reaching a high, so I bought back the government bonds I had reduced the previous day.
By noon on the third day, the Political Bureau held a meeting to fully focus on the economy, and thus the stock market began to soar while government bonds began to plummet. Coincidentally, that afternoon, I was in a meeting and only glanced at the news, not paying much attention. At that time, I did not reduce my positions in government bonds. By the evening close, I felt something was wrong; various groups showed great optimism about the stock market, and everyone felt a bull market was coming.
In the evening, some friends called me, saying this situation was different, and the stock market had a very favorable outlook this time, so I decided to reduce positions the next day. My trading system is set to force a reduction in positions when a 20% drawdown occurs from the peak. Since my fund withdrawal did not reach 20% that day, I did not take action.
However, on September 27, the government bond market gapped down directly at the opening, and the fund withdrawal exceeded 20%, even approaching a 30% drawdown. I began to reduce my positions, but due to the large position size, if concentrated operations caused price fluctuations, I would be warned, so I reduced my positions slowly that morning. The price kept falling as I reduced my holdings, and by the end of the day, I had reduced my position in government bonds by about 40%, resulting in nearly a 40% loss due to the continuous price decline.
By the afternoon, I was feeling a bit lucky, fantasizing about a rebound, and since I had already reduced a lot of positions, I reduced my position by 20% that afternoon, totaling 60% reduction in government bond positions that day. By September 30, at the market open, my fund withdrawal had reached around 50%, and I had almost fully reduced my government bond contracts.
Although I knew that this was due to the sharp rise in the stock market, leading to a significant drop in government bonds, I should have realized that the drop would not be so severe based on the fundamentals. However, I must strictly follow my fund management principles, which meant I reduced all positions at a relatively low level.
If I had followed my previous fund management principle to fully reduce positions once a 20% drawdown occurred, the fund withdrawal would have been around 30%, and it would not have reached the severe 54% drawdown.
Of course, in addition to having too large a position, the market changes were relatively extreme. More importantly, I did not execute my fund management principles decisively. This is my analysis of the reasons for the significant drawdown this time.
After analyzing the causes, I need to find ways to improve. Every time I experience a significant drawdown, I will reflect for a long time. The solution I found is:
First, improve my ability to adjust my mentality, avoid losing balance after large profits, especially the bigger the profit, the more vigilant I should be, and respect the market.
Secondly, I need to optimize the trading system. My trading system is based on increasing positions with floating profits. As floating profits increase, my positions will gradually increase. Now it seems that this approach might encounter 'disastrous' situations when facing extreme black swan events. Although this time I encountered a once-in-thirty-years stock market surge, the financial market may still have more extreme situations. How should I avoid such risks?
I believe I must improve and optimize the floating profit increasing system. In the future, I may increase positions at the initial entry and reduce the amount and frequency of follow-up capital injections. When profits reach a certain level, I will gradually reduce positions instead of continuously holding, which is an improvement in fund management.
3
Coal and soda ash, making millions.
In 2021, the thermal coal market experienced volatile fluctuations in the third and fourth quarters. The price of thermal coal first soared from around 800 yuan to over 2000 yuan, then plummeted.
Given the strategic resource properties of coal and its close ties to people's livelihoods, the National Development and Reform Commission has introduced a series of measures to restrict coal prices. Zhou Wei initially shorted at around 1800 points and exited with a stop loss. When coal prices dropped to around 770 points, he re-entered to catch the rebound, compensating for the previous short loss of about 200 points.
This experience made Zhou Wei deeply understand that investing must follow national macro policies, act in accordance with the trend, and not trade against national interests. This is one of the important principles he teaches daily.
In May 2021, the country implemented carbon reduction policies, cutting steel production capacity. Zhou Wei judged that the supply of rebar would decrease, expecting a price increase, leading to rebar prices rising from 5000 yuan to around 6000 yuan.
At the same time, the demand for iron ore would also decrease, with prices falling from around 1300 yuan to about 800 yuan. Thus, in May, he went long in rebar futures at around 5200 points and focused on shorting iron ore at around 1200 points in July, again reaping substantial profits.
Around the Spring Festival, the soda ash market faced tight supply and demand, and the country vigorously developed the photovoltaic industry. Since glass and soda ash are closely related, a large amount of soda ash is needed to produce photovoltaic glass. Zhou Wei went long on soda ash around 2200 points, initially holding more than 1000 lots, later increasing to over 3000 lots until the price rose to over 2700 points, with a profit of about 500 yuan per ton, ultimately making over 10 million yuan.
Zhou Wei summarized the key to successful investing as: first, accurately grasping the direction of national macro policies; secondly, deeply researching and judging based on industry supply and demand; thirdly, trading based on fund management, following a trading system, while listening to the market, sensing its dynamics, and respecting and fearing the market.
4
Fund management and risk control.
Zhou Wei places great importance on fund management.
If a commodity's price is much higher than its historical average, Zhou Wei first observes whether there is a strong driving force. If so, he will build a position but will not go heavy. Unless there is significant floating profit, he will increase the position.
Currently, Zhou Wei combines futures and stocks for fund management. If total funds hit a new high, the total fund leverage will not exceed three times.
If total funds withdraw more than 10% from the peak, total fund leverage will not exceed two times; if withdrawal exceeds 20%, then leveraged trading will not be allowed.
If after building a position, the market trends toward profit, then he starts to increase positions based on floating profits; if the market remains volatile, he maintains the positions. When profits exceed 10% of occupied funds, Zhou Wei will begin to increase positions.
If a fundamental judgment is incorrect or if losses reach more than 5% of total funds, he will reduce positions. After experiencing significant losses, Zhou Wei first lowers his positions, either holding very light positions or going flat.
5
In futures trading, it all comes down to self-discipline.
Making profits in the futures market is not easy. Zhou Wei believes that the primary goal in futures trading and investing is to preserve capital and to build a suitable trading system based on personal circumstances.
He knows that the probability of making money in the market in the long term is very low. After 25 years in the industry, although his ability to judge market trends has not improved much, his self-discipline has greatly increased. Through continuous review and reflection, he solves difficulties and thus improves his trading results.
In futures trading, success relies on self-discipline. Life and trading are closely linked; one must continuously cultivate personal qualities and overcome shortcomings unsuitable for trading, such as dishonesty, impatience, and lack of effort. Once cultivated to a certain degree, trading will naturally improve.
This process was arduous and lengthy. If one can endure hardship, even without trading futures, one can succeed in other fields. To succeed in futures trading, one must be prepared to endure hardship.
