The specific manifestations of six types of troubles in trading and their remedies:
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1. Greed - The fatal temptation of trading
· Manifestation:
· Not taking profits: The position has already made significant profits, but one fantasizes about 'making the last cent' and is unwilling to exit, resulting in a reversal of the market and a loss of profit.
· Frequent trading: Unable to tolerate being out of the market, wanting to operate whenever there is an opportunity, trying to catch every small fluctuation, while ignoring trading costs and success probabilities.
· Heavy betting: Not satisfied with reasonable capital growth, trying to 'get rich' through a single trade, violating risk management principles; once a mistake is made, the losses are heavy.
· Chasing Profits While Ignoring Risks: Only seeing potential profit space while ignoring huge risks.
· Core Countermeasure:
· Formulate and Execute a Trading Plan: Clearly define entry points, profit targets, and stop-loss points before trading. Execute as planned, eliminating emotional decisions during trading.
· Contentment: Only earning what should be earned within the system, giving up the illusion of capturing all market moves.
· Strict Capital Management: Controlling the loss of a single position to a fixed proportion of total capital (e.g., 1%-2%), mechanically eliminating catastrophic losses caused by 'greed'.
2. Anger - Emotional Loss of Control in Trading
· Manifestation:
· Not Cutting Losses: After a position incurs a loss, failing to cut losses as planned, instead developing feelings of 'anger' and 'resistance': 'I just don't believe it won't come back!', leading to continuous losses.
· Revenge Trading: After a loss, the imbalance in mindset leads to a rush to 'recoup losses', hastily entering the market when the timing is not right, causing a chain of losses.
· Complaining About the Market: Attributing losses to external factors such as the market, institutions, news, etc., without reflecting on one’s own issues.
· Fear: Experiencing fear due to past loss experiences, hesitating to open positions when opportunities that fit the system arise.
· Core Countermeasure:
· Accepting Losses: Deeply understanding that 'losses are part of the cost of trading', just like having rent when opening a store. Calmly accepting a single loss as long as the overall system is profitable.
· Pause and Calm: After consecutive losses or a significant loss, force yourself to step away from the market, take a break, and return only when your mindset is calm.
· Taking Responsibility: Firmly believing that 'the market is always right', with oneself as the only responsible party for all trading outcomes.
3. Ignorance - The Root of Confusion in Trading
· Manifestation:
· Pretending to Understand: Lacking a mature trading system or lacking understanding of the essence of the market (such as uncertainty, randomness).
· Seeking the 'Holy Grail': Blindly believing in the existence of a 100% win-rate indicator or method, spending a lot of time and money chasing various 'mystical strategies'.
· Ignoring Major Trends: Continuously bottom-fishing in a clearly downward trend, or constantly trying to top-tick in an upward trend, violating the basic laws of the market.
· Not Understanding Probability Thinking: Judging the merits of a system based on the outcomes of single trades, rather than thinking from a long-term and probabilistic perspective.
· Core Countermeasure:
· Establishing Right Views (Trading Philosophy): Learn and accept the basic laws of the market: trends, cycles, uncertainty. Build a mindset of 'winning through probability'.
· Build and Improve Trading Systems: Create an objective system that includes entry, exit, and capital management, and adhere to it long-term, substituting rules for conjectures.
· Continuous Learning and Reviewing: Continuously research the market and learn from each trade, internalizing experiences into personal knowledge.
4. Slow - The Trap of Success in Trading
· Manifestation:
· Overconfidence: After consecutive profits, believing one has 'defeated the market', beginning to relax discipline, increasing position sizes, no longer following the system.
· Underestimating Risk: Ignoring potential risks due to previous successes, no longer seriously implementing stop-loss measures.
· Rejecting Advice: Stubbornly clinging to one’s opinions, refusing to accept others' good intentions or objective market signals.
· Attribution Bias: Attributing profits to one’s own abilities and blaming losses on bad luck.
· Core Countermeasure:
· Maintain Awe: Always remember that the market is powerful and ruthless, and individuals can never control the market.
· Humble and Cautious: Viewing success as a gift from the market and the effectiveness of the system, rather than an absolute reflection of personal ability.
· Regular Reflection: Regularly review your trading records and mindset to prevent the growth of 'slow' thoughts.
5. Doubt - Indecision in Trading
· Manifestation:
· System Drift: Lacking confidence in one’s trading system, using method A today, switching to indicator B tomorrow, unable to stick to any one method.
· Signal Hesitation: When the system's entry/exit signals appear, hesitating and failing to execute results in missed opportunities.
· Over-Optimization: Constantly modifying parameters during backtesting, attempting to fit past data, resulting in the system failing in the future.
· Blindly Following Authority: Completely relying on the calls of 'masters' or 'experts', losing the ability to think and judge independently.
· Core Countermeasure:
· Trust Your System: Build confidence in your system through thorough backtesting and simulation. Once established, adhere to it like a belief.
· Mechanical Execution: Program the trading decision-making process, executing signals as they appear, reducing interference from subjective judgment.
· Understanding 'Imperfection': Accept that there are no perfect systems and that systems will fail at certain times (drawdown periods); this is the inevitable cost of long-term profitability.
6. Wrong Views (Evil Views) - Misunderstandings in Trading
· Manifestation (Five Wrong Views in Trading):
1. Self-View (Ego): Overemphasizing 'my' judgments and feelings, such as 'I feel it will go up', rather than respecting the objective trends of the market.
2. Extremist Views: Either being a 'die-hard bull' (common), believing that a bull market lasts forever; or a 'die-hard bear' (extreme view), believing that the economy will never get better.
3. Wrong Views: Denying the basic laws of the market, such as 'technical analysis is useless', 'value investing is a scam', or believing that 'insider information is the only way to make money'.
4. Misguided Views (Holding onto Inferior as Superior): Stubbornly believing that one's crude, untested trading methods are the best and most effective, refusing to improve.
5. Abandoning Wrong Views (False Rules): Clinging to some erroneous trading habits, such as 'loss positions must be held until they break even', treating them as ironclad rules.
· Core Countermeasure:
· Breaking Ego, Following the Market: Abandoning subjective assumptions of 'self' and becoming a follower of the market. Prices say it all.
· Establishing Right Views: Learn and firmly believe in the core concepts validated by countless successful traders: trend following, risk control, systematic trading, probability thinking.
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Summary
In trading, 'ignorance' is the root of confusion, preventing us from seeing the truth of the market.
Due to 'ignorance', various erroneous 'views' (trading philosophies) arise.
Based on erroneous concepts, greed surges during profits, while anger burns during losses.
A slight profit can trigger 'slow' thoughts.
Yet harboring deep doubts about the correct trading system, unable to persist.
A mature trader is essentially a practitioner who constantly struggles against their own 'greed, anger, ignorance, sloth, doubt, and views'. Their success does not lie in predicting how accurate the market is, but in how deep their awareness and control of inner turmoil is. The highest realm of trading is the transformation from 'mind following the environment' (being led by market fluctuations) to 'environment following the mind' (inner peace, objectively responding to market changes).