Daocheng foreign exchange talks about the investment mentality of the foreign exchange market

In trading, emotions are often used against the market, as if the market will bite back at any moment. Emotions can also be a weapon against themselves. In fact, the market never really hurts you, and even when you feel hurt by the market, you have no idea what the market looks like. Losses are usually due to two reasons: one is that the technology is not mature enough, and the other is that the psychology is not strong enough to be easily influenced by the outside world.

Ask yourself a question: at the high point, is it psychologically unbearable and want to increase? How many points have already fallen, and continuing to be bearish at this time is already a psychological struggle, which is difficult to analyze objectively. At this time, Daocheng Forex reminds you that you must understand the thoughts of the public. Retail investors often think that "it has fallen so much, there is no need to lower it", which is a common view. You need to understand that this kind of thinking is human nature, but it is not correct. Wanting to increase is often driven by psychology, not technology. Including myself, I will also feel pain after a big drop. All the way down, I know that my psychology has been bearish to numbness, which is a torment. The road to trading is lonely. You can't be influenced by too many external influences. You must be completely independent from the market. Success can only depend on yourself. It is precisely because of this that trading is full of charm. At this time, you will have a deeper understanding of yourself and find that your confidence is so fragile. Only by understanding yourself can you further improve your trading skills. Many veterans get stuck halfway, often because of psychological problems. No matter how good the technology is, it is useless. You must overcome psychological obstacles.

Operating and guessing the market are two different things. As emphasized before, "going long because you are bullish" and "going long because you should be long" are completely different. The way many people operate is to judge whether it will rise or fall in the future, and then establish a position to wait. If the market does not develop as expected, it will panic and refuse to stop losses, which will eventually lead to breakdowns or huge losses. Objectively speaking, insisting on how the market will develop is just our wishful thinking. No matter how good we are at analysis, the market does not care what we think, not to mention the situation changes rapidly. In operation, many places must set aside their own views on the market, including the views of others. For example, when it is time to stop losses, you must stop losses, and when it is time to take profits, you cannot hesitate. Many mechanical operations cannot give themselves any excuses, and cannot gamble on the market because of "insistence on what will happen". This is not an operation, but to leave fate to God. We must know that our operation is to establish a "winning mode". When you leave this safe winning mode, you are gambling and doomed to fail.

The psychological problem is not easy to break through. You have to know where your odds are before you can be confident. It is a normal natural reaction to be slightly rolled before and hesitate to make a move next time. The biggest emotional reaction in trading is worry, because of fear of losing money, because of not entering the market, for various reasons. When it comes to building a position, there are often many inexplicable and bizarre ideas that come to mind. Suddenly, I think of a certain loss in the past few days, or a thought that I would not normally think of - will there be an earthquake as soon as I buy? Worry is everyone's problem, but you have to learn to overcome it on your own. Once a successful operating model is established, the next step is to execute. Without execution, everything is empty talk.

It is the psychological aspect that makes it difficult to see a rise from a low to a high. In fact, the difficulty of market operation lies in the psychological aspect. If you hold a position all the way down, you must wait for the turn signal to appear before taking action, but usually along the way, your psychology will urge you to take profits quickly. At this point, you must endure the "pain" and insist on doing the right thing. In the short term, even if you plan to go long tomorrow tonight, when the market opens and falls sharply tomorrow, you may regret it. R. Dennis said that even if he publishes all his trading secrets in the newspaper, no one will succeed, because no one can strictly implement it. How to overcome the psychological aspect? It can only be said that only by relying on your own growth, your growth must come from your life, because the market is the embodiment of your usual lifestyle.

The road to trading is the road to learning. For everyone, failure is almost self-inflicted. In the market, you have to change your frequency and follow the market. Few people are naturally suitable for the market, so to succeed, you must change! Change all the wrong concepts and habits in the past, and keep practicing the correct behavior to become your instinct. Emotions can make people chase up and kill, so you have to control them. Human nature does not want people to easily recognize losses, so you have to get used to the feeling of recognizing losses; human nature also does not want people to give up existing profits and take up the ante, so you have to overcome short-sighted and short-term ideas. Doing the right thing in the market almost always brings pain. People's choice must be to stay away from pain, to stay away from pain but also to stay away from success, so there are only a few people who are destined to succeed. Reflection also brings pain, because it means admitting that you were a failure in the past, so people keep repeating the same mistakes.

I once taught a man how to play the game, but then I failed. Maybe I had some responsibility, but I gave up teaching anyone else. He was a loser in the past, and he thought I was not bad at the time, so he learned from me. He had many typical mistakes, and the game often went day by day. I told him a lot of valuable lessons, a lot of things to know about the game, a lot of mistakes I had made. But then I found out that none of this worked. He always let himself miss opportunities because he "didn't want" to come in and be under pressure. When I saw the opportunity, I even shouted: "You hurry up and place an order for me right away!" He just didn't dare. He also knew that this was a great opportunity to enter the market, but he had his own excuses. He told me that he was afraid of what would happen and that he would lose money.

Once, he went into the market and took a long position, which went very well, rising 400 points in two days. I told him, "You have to go up the ante and chase after the victory, you have 400 points profit now, take 200 points out of the ante, I have a hunch that you will make a lot of money." He didn't want to, he said he was going to squaring this hard-won profit position, he was afraid of losing what he saw now. He was forgiven for thinking this way, because he had lost 4 in a row before this, and he didn't want to lose a fifth. However, I knew his idea would fail in the market, but I couldn't force him to do anything he didn't want to do. I said, "Okay." I don't care what he thinks at all, and the market doesn't care what he thinks. What's the problem? It's that he's not a blank slate. He has too many subjective ideas, but those ideas are often wrong in the market.

The most obvious interpretation of the psychological aspect of the trend mentioned earlier is the so-called "boiled frog principle". Traders feel like a frog about losses: when we throw the frog into hot boiling water, it will struggle violently and frantically; but if we throw the frog into cold water and slowly heat it up, it can be cooked alive. In the short market, when there is a slow decline, retail investors show great patience, because losses are only accumulated slowly, and there is no pain. Or in the dull market, serious losses often occur unknowingly. Daocheng Forex reminds investors to always be vigilant of the psychological trap of this warm boiled frog.