Investors should follow golden mean, avoiding willfulness, and they need to cultivate a quality, to fear the market, which involves whether we really understand the market characteristics, and truly understand the meaning of financial transactions.
Insist on in-depth research
“Learn about the economic situation, understand the business rules, and wait for market opportunities;” These sentences are intended to express the theoretical background and business practices of investors, as well as the trading principles followed. As a fundamental investor, you must have considerable economic knowledge and business thinking skills. Investment needs business logic, also needs to adapt to the characteristics of the financial market, pay attention to the market rhythm, and wait patiently for market opportunities.
Emphasize the security of the principal
“Respond to changes in the market, weigh profit and loss, strictly control risk.” This is intended to emphasize the requirements of the transaction on the state of mind and experience. Getting market changes should not only on the big trend, but also needs to deal with the fluctuations, maintain the market sensitivity, and balance the profit and loss. Financial markets don’t approve advance rashly, survival is the first, and making money is second. A sound security strategy must be built. The financial factors of the market, such as the herd effect, the hot money, the emotional chasing, once a market trend is formed, it will not end in a day or two. As the theory of reflexivity described by Soros, the market will repeatedly strengthen itself. After entering the market, if the direction is right, the profit should be taking as far as possible; if the reverse is fluctuating, it is necessary to stop the loss. Although the fundamentals are already reasonable, it doesn’t mean the time to trade has arrived.
Appropriate expectation of income
“Humanity prefer to be optimistic, and the market is chaotic, treat expectations of income rationally;” This one is intended to warn of overcoming optimism in fund management and risk control, especially to be alert to the situation that obsessed with so-called opportunities resulting in too big amount of funds and entering the market too early. Because of human subjective stubbornness and thinking inertia, it is easy to think paralyzed and to be blindly optimistic. The market is complex and changes are instantaneous, so the amount of funds should be small, the position should be short, and the exit should be fat when it’s supposed to be. Amplifying psychological expectations, pursuing huge profits, and unwilling to eat small losses often lead to big losses. Don’t be passively beat and be controlled by others, if you ain’t feel right, run immediately and reduce the loss of principal in time. There is a chance behind only when you live.
Enhance investment skills
“Doing business is like fighting a battle.” This one is intended to describe the market as a battlefield. A professional investor is a businessman, just like a battlefield commander. Traders need to have comprehensive quality and excellent character, and they must establish a cautious war mentality, be flexible and understand the responsibility. Compared with the business process of the entity business, the futures are highly compressed in time. Although the market price must return to commercial value, the process is full of twists and changes, and may face huge changes of profits and losses in an instant. Therefore, futures need to pay attention to a kind of array method according to a routine, and it cannot be chaotic and gambled unruly. The use of funds must be based on safety, making early plans in the risk control, make a prompt decision in case of changes, leave safely with funds. At the same time, trading requires not only caution, but also the need for courage. When the market turns, it is necessary to decisively enter the market, the so-called “others are greedy, I fear, others fear me greed.”
Setbacks are inevitably in trading, so it definitely needs learning and improving from them.