The Dual Cultivation of Traders: Technology is the Spear, and Capital Management is the Shield
Trading is a war. In this war, technical analysis is your 'spear', the tool for discovering market opportunities and choosing your attack direction. Whether it's moving averages, MACD, candlestick patterns, or other trading systems, they all help you judge trends and find entry points, with the aim of 'hitting the target and making a profit'.
On the other hand, capital management is your 'shield', the survival tool that protects you and defends against market counterattacks. It includes a series of rules like position sizing, stop-loss settings, profit-loss ratio planning, and drawdown control. Its sole purpose is to ensure that you do not suffer fatal damage in case of an attack misstep or market backlash.
The tragedy for the vast majority of retail investors is that they spend 90% of their time and energy honing that 'spear', trying to find the sharpest and most magical weapon, while completely ignoring the existence of the 'shield'.
The result is often: the offense looks sharp and can occasionally catch prey, but as soon as the market delivers a powerful counterattack, it can be completely defeated.
True trading masters are balanced cultivators of both the 'spear and shield'. They use the 'shield' (capital management) to define safe operational boundaries, and then within these boundaries, they wield the 'spear' (technical analysis) to strive for victory.
Offense determines how well you live, while defense determines whether you can survive. Starting today, value your capital management as much as you value your technical skills.
