01
All successful individuals are built upon the foundation of numerous failures, and this is especially true in the financial speculation market, which forms the basis of market cycles. The majority in the market are failures. Some say the market is a graveyard for elites. At its core, even elite figures find it difficult to transcend fear and greed, inherent aspects of human nature, within the investment market. The market reflects life and mirrors human nature.
Doing the right thing in the market often goes against human nature. It requires transforming ingrained concepts and making precise judgments about complex matters. Deep-rooted old ways of thinking inevitably clash with new ideas during trading. We must learn to let go of distractions and the old thoughts in our minds, and completely transform ourselves. Changes should be made in learning methods, living habits, ways of thinking, dietary practices, and interpersonal interactions, reaching a state of understanding the intrinsic laws of things. Investment does not involve complex techniques; what matters most are concepts. Correct concepts lead to success, and successful individuals simply cultivate habits that ordinary people dislike and cannot achieve.
If an investor cannot transcend their instincts, change their mindset, or alter their behavior, they will not achieve real success in the investment market. Without changing internally, external changes are futile. The renowned psychologist Maslow once said: 'When your mind changes, your attitude follows; when your attitude changes, your habits follow; when your habits change, your character follows; when your character changes, your life follows.' Only by letting go of obsessions can one turn the situation around. Only through complete transformation can one grasp the key contradictions amidst complexity.
'You don't know who you are, so you remain who you are.' Some people spend their entire lives exploring the market but never take the time to understand themselves. Some fail to realize that failure doesn't come from the market; instead, they defeat themselves in the market. A person's greatest enemy lies within. The investment market differs from other aspects of social life. While engaging in any other social profession, human weaknesses can be concealed to some extent, but in the investment market, everyone inevitably exposes their vulnerabilities fully.
Open bidding is a public display of human nature. A K-line, two colors, three parts, four prices—it reflects the traces left on the chart after intense battles between fear, greed, anger, hesitation, desire, ignorance, and prudence, wisdom, knowledge, and enlightenment. In trading, human greed manifests as follows:
1. Overtrading and frequent trading, hoping to get rich overnight.
2. Earning small profits but incurring large losses. When making money, one thinks 'A bird in the hand is worth two in the bush,' eager to cash out gains. However, when losing, one refuses to accept small losses and holds onto losing positions, hoping that prices will return to near the opening price to make a profit before closing, resulting in ever-increasing losses.
3. Fear of missing out on opportunities leading to counter-trend trading. Observing one’s behavior in the market can help you understand yourself. The more thoroughly you understand yourself, the closer you will get to the essence of the market.
Human weaknesses in trading are innate traits, and overcoming them completely is very challenging. Prominent historical figures such as Newton, Einstein, Churchill, and Chiang Kai-shek all experienced setbacks in securities investment. Afterward, Newton remarked: 'I can calculate the orbit of celestial bodies, but I cannot calculate the madness of human nature.' Amidst turbulent market conditions, 'If your heart follows the environment, it becomes troubled; if the environment follows your heart, it brings joy.' The only thing you can control is your own mind amidst too many desires and fears.
Thus, maintaining rationality and clarity in the market is exceptionally valuable. To become a winner, one must overcome personal weaknesses and keep them within reasonable limits. One must dare to maintain independent and rational thinking. As Buffett said: 'We also experience fear and greed, but we are fearful when others are greedy, and we are greedy when others are fearful.'
02
Investment is an art that profoundly influences the human spirit, requiring the ability to decipher cultural codes of higher cognitive realms. The attributes of one's culture determine their patterns of thought and action, which in turn shape their destiny. Technology, culture, breadth of vision, and financial resources are the core elements of investment. Society can be analyzed through three layers: technology, institutional culture—applicable to individuals as well as nations—and every form of fate is a product of these cultural attributes. A dominant culture cultivates strength, while a subordinate culture fosters weakness. This is the law.
Quantitative change is not difficult; it simply requires gradual accumulation. What is challenging is qualitative change. Many people are not incapable of action but are constrained by limitations in knowledge, experience, and perspective, leading them to focus on immediate gains. Worse still, they often believe themselves to be knowledgeable, obsessing over trivial details while neglecting the bigger picture. Overemphasis on technical precision can lead to fixation on superficialities, deviating from the essence of matters. Without an understanding of the fundamental principles governing complex phenomena, one cannot see deeply or far into the future. Lacking the wisdom of successful individuals is a sure path to mediocrity.
What you perceive is what you achieve; your level of knowledge determines the returns on your investments. Destiny lies in one’s own hands, and only oneself can save oneself. Rather than attributing one’s life trajectory and fate to providence, it is more accurate to say that they are self-determined.
Achievements stem from foundations, accumulation, and opportunities, but ultimately depend on one’s ability to seize them. The key to seizing opportunities lies in 'enlightenment.' What does enlightenment entail? It involves understanding the Dao—the laws, the true nature of things, and the underlying causes and effects hidden beneath appearances. Gains must align with principles; deviation leads to failure. How to enhance enlightenment? That requires personal reflection, contemplation, and experience. Achieving such insight is not easy. In fact, those who penetrate beyond appearances to grasp the essence of phenomena undergo continuous cycles of awareness and enlightenment. The scope of one’s mind determines the breadth of their world. In the market, what is cultivated is character; what is gained is a mindset aligned with potential rewards.
Some say survival belongs to the fittest, but I believe it belongs to the wise. In trading, let wisdom guide actions. Knowledge, wisdom, and technical skills are distinct concepts; possessing knowledge without wisdom will not lead to successful trading. Do not focus solely on techniques; instead, practice the philosophy of life. The enlightened awaken the unenlightened; those who have realized truths should help others understand, guiding friends who are lost onto the path of clarity.
All things are subject to change, but the one constant is our true nature. Zen cultivates the mind, while Dao nurtures character. Analyze human behavior and thoughts with religious-like awareness. This helps restore our innate wisdom and enlightenment. Open the door to wisdom to eliminate 'karmic obstacles.'
Most people in the market understand,Technical analysisbut they still cannot escape the fate of losses—they fail due to their 'mind.' Mastering this level requires Buddhist notions of 'causality' and 'enlightenment'; those with such inherent aptitude will ultimately become expert traders.
The term 'Zen' refers to 'contemplative practice,' which means using the mind to deeply consider certain principles and cultivate one’s inner self. It also implies 'single-mindedness,' focusing one’s mental energy entirely on a specific principle without distractions. This method trains discipline, patience, perseverance, and confidence. Only after overcoming this stage can one truly see. The distinctions between the first, second, third, and fourth stages of Zen are based on the depth of the practitioner’s efforts in meditation.
To perceive and comprehend is to act accordingly. The so-called true scripture is the substantive principle that leads to ultimate emptiness and Nirvana. It can be comprehended but not merely practiced. Practice leads to Buddhahood. See with the eyes of Buddha and think with the heart of Buddha; the spiritual mind resides within you. Buddha represents awakening, and not everyone possesses enlightenment. Seeking awakening clarifies one’s nature. Knowledge informs practice, while awakened understanding directs action. The enlightened derive laws from the heart, while practitioners use laws to restrain the heart.
Great enlightenment is achieved through sincere practice, culminating in complete awakening and supreme wisdom. However, observing one’s own mind is the simplest and most direct path to enlightenment. Transforming rigid thinking into a new mindset leads to significant intellectual elevation. Enlightenment is a process of shifting perspectives and thought patterns. A sudden change in perspective signifies profound enlightenment. To be enlightened means understanding the existence of the Dao and sincerely adhering to it without deviation. Deities are created based on human needs; they do not exist but serve as spiritual anchors. God is the Dao, and the Dao follows nature.
A person must focus their mind and pursue their true self continuously to eventually perceive the great Dao. One’s true self is Buddha. Sudden enlightenment reveals one's inherent nature. The mind represents desire, while spirit represents a state of being, which is an integration of cultural experience and innate talent. Success in trading cannot rely solely on skills; only those who constantly learn, reflect internally, and seek wisdom have a chance. Wisdom brings wealth and happiness. All phenomena should be regarded with such understanding. Whoever violates natural laws deviates from a righteous outcome.
04
All judgments in trading are made by oneself. Errors often occur in judgment during practice, so the probability of success depends on the magnitude of these errors. Transmitting different 'thought energies' in the market is a key issue that determines success or failure. Establish correct beliefs, inspire true wisdom, implement proper actions, and achieve ultimate enlightenment.
Joining either the long or short side in trading is influenced by 'thought energy.' A single thought can lead to heaven or hell. The logic behind successful modern speculation assumes that the masses will continue to make past mistakes. This is the foundation of speculative success. Maintaining positive thoughts enables one to overcome and transcend oneself, avoiding repetition of previous errors. Thus, inputting good 'thought energy' helps distinguish between what one wants to do and what one can do, avoiding judgment errors and quickly achieving one’s goals.
'Thought energy' stems from one’s talent, spirituality, insight, imagination, and rigor, along with a positive mindset, high emotional intelligence (EQ), and resilience. Insight derives from knowledge and experience, which accumulate over time. Why do different people arrive at varying judgments when faced with the same problem? Why does the same individual make different judgments about the same issue at different times? This relates to one’s comprehensive understanding of matters.
Successful trading occurs when a person, having gained depth and breadth, engages in dialogue with the market at a higher level. You are the master of your fate in the market! When you possess discernment, adaptability, critical thinking, judgment, perceptiveness, and logical reasoning in the face of challenges, survival concepts in the market will resonate deeply within you, and your mental strength will become immensely powerful. Your trading skills will then reach a higher realm. You will be able to assess your operations and future based on the conditions you control. At this point, you will understand the language of the market.
When you open any chart, the market movements resemble those of a familiar friend or lover. You can sense its rhythm and heartbeat during trading hours. Daily observation feels like a whispered conversation—a soulful connection difficult to articulate clearly to others. You can immediately grasp what the market is doing and swiftly determine whether its intentions are achievable through various clues. At this stage, you comprehend the core philosophy of trading: meticulously plan and strategize before executing trades, applying precise force at the right time and position to launch a decisive 'attack' on vulnerable yet critical areas.
You know you will win as soon as you enter the market. Without absolute confidence, you should not initiate a decisive 'attack.' Once launched, however, be prepared to endure psychological costs, leveraging market momentum to relentlessly pursue gains and capitalize on victories until all accumulated market energy dissipates, resulting in profitable closure. Achieving consistent precision becomes attainable rather than idealistic, and returns will surpass those of most participants.
05
Financial speculation is undoubtedly both an art and a philosophy. Only those who comprehend the transformation between yin and yang can excel in this field. Humans follow the Earth, the Earth follows Heaven, Heaven follows the Dao, and the Dao follows nature. Since humans originate from nature, let us draw inspiration from it, for it holds all the answers regarding financial speculation.
Financial trading is among the most challenging professions to succeed in because it involves psychology and human nature—some of the most enigmatic aspects of existence. These belong to Laozi’s concept of the 'extraordinary Dao,' which we recognize exists yet cannot describe. It can only be felt intuitively.
The essence of trading is:
A sense of the big picture (following the trend),
Patience (the choice of opportunities),
Attention to detail (grasping entry points),
Courage (when an opportunity arises, there must be no hesitation)
Thinking (respecting opponents and thinking dialectically about issues),
Willpower (attitude towards fluctuations after holding a position),
Mental resilience (do not dwell on losses, do not attempt to make the market immediately return losses, do not try to retaliate against the market),
Calmness (do not become arrogant after profits; money earned from the market is the easiest to lose back to the market).
…………
Another key aspect of the essence of trading is 'selflessness!' Many social elites are too self-centered, always believing they are exceptional. Such a mindset may work in society but is most likely to hit a wall in trading. This is because such individuals are fundamentally 'self-centered' and cannot consider others, let alone actively think for their counterparties. These individuals often believe they are brilliant, invincible, and that their counterparties are merely fools waiting to be defeated. They struggle to achieve thorough dialectical thinking.
06
One can often see all kinds of people coming to the market:
A coal boss with golden teeth smokes a premium cigar and says, 'I have plenty of money; money is absolutely not an issue.' I want to ask this 'big boss,' when copper rises from 40,000 to 80,000, do you have the money to hold short positions?
A Ph.D. in finance from a prestigious university comes to Speculation Island and asks, 'I am a Ph.D. in finance from a key university. Can I master trading within a month?'
Miss Anteng, a well-known figure on Speculation Island, always talks about 'how I successfully developed a software indicator system with such high success rates and billions of times returns…'
Such people come in waves, and then leave in waves…
In fact, in front of the market, what am I? The market is sacred! On what basis do I dare to presume to fathom the market? On what basis should the market align with my position-holding direction? On what basis must the market bring me wealth?
To excel in trading, one must strive to achieve 'selflessness!' Because of 'selflessness,' there is 'no desire' and 'no pursuit.' The market is always right, and one should always follow the market's direction!
Simply following the trend is not enough.
I can't stand it anymore. Seeing you trade like headless flies every day without considering the macro-level reasons for your trading success or failure, I will reveal a core secret.
I bet eighty percent of traders can identify trends and follow them. So how does the market eliminate most trend-following traders to ensure its own survival? The answer is as follows.
07
Below are the seven reasons why trend-following trading can also lead to failure:
1. First, we need to understand what a 'trend' is.
A trend is simply a concise interpretation of a chart, determining whether it is moving upwards or downwards. Over 80% of traders, with the help of textbooks, can identify the direction of the chart. The issue is that merely identifying the direction of the chart is far from sufficient.
2. For any given chart, we can perform spatial analysis, which includes three key elements: direction, volatility range, and central point.
To engage in trading, we must establish a stop-loss, which should be set outside the volatility range.
3. The premise now is that the trader has correctly identified the trend and its direction.
For traders focused on risk-reward ratios, if your entry point is above the central point of the chart, your risk-reward ratio will be 1:1. Over the long term, your profit targets will exceed your stop-losses. If your entry point is significantly above the central point, your risk-reward ratio will be greater than 1, making it more likely for you to win over time, albeit with fewer entry opportunities. However, if your entry point is below the central point, your risk-reward ratio will be less than 1, meaning that over the long term, you will lose, even if you are following the trend. In other words, for risk-reward traders, even if you have correctly identified the trend and followed it, if your entry point is below the central point, trend-following trading will still lead to failure.
The key to success lies in your ability to accurately interpret the chart, entering at the upper edge or above the central point. Otherwise, even if you follow the trend, you will still fail.
4. Let's now examine another type of trading method: grid trading.
The characteristic of grid trading is small profit-taking and large stop-losses. Trend-following grid trading takes profits in the lower region, does not set stop-losses in the upper region, but places stop-losses outside the volatility range. This results in profit-taking occurring much more frequently than stop-losses. Even for grid traders, they must be able to identify trends; otherwise, their profit-taking success rate will be insufficient to offset the losses. After correctly identifying the trend, if their entry point is not above the central point, over the long term, their total profit-taking will still fail to cover their stop-loss amounts.
In other words, for grid traders, even if they follow the trend, if they cannot enter above the central point, they will still fail.
5. Is it certain to win if one can judge the trend and enter above the central point?
The answer is no. If your stop-loss is too small to be outside the range of price fluctuations, or if the volatility of the chart you choose to enter frequently exceeds your stop-loss, you will still lose. Therefore, the prerequisite for winning is having sufficient ability to judge the range of price fluctuations and setting an adequate stop-loss. If the stop-loss is too small, you are destined to lose perpetually. Many people go wrong on this fundamental path, making it impossible to succeed regardless of their efforts.
A stop-loss represents your potential to amplify future profits; the market generally controls the size of stop-losses. Excessive leverage can only correspond to an extremely small stop-loss, and the inevitable result of an overly small stop-loss is failure. Therefore, excessive leverage or an overly small stop-loss guarantees failure. It’s not a matter of trading ability but a fundamental error, akin to attempting to violate the law of conservation of energy—there is simply no chance. Most traders fail to comprehend that stable profitability with high leverage and small stop-losses could destabilize the market. Choosing high leverage or small stop-losses implies an attempt to defy the conservation principle.
In other words, those who trade following the trend with small stop-losses or excessive leverage are bound to fail.
6. Due to the spread, if the price fluctuation range of the trading chart is too small, the central point will be too close to the edge point, reducing the probability of entering above the central point.
Thus, excessively frequent trading and ultra-short-term trading cannot secure victory unless you identify a flaw in the market, leveraging certainty and probability to gain an advantage.
In other words, excessively frequent trading and ultra-short-term trading will fail even when following the trend due to the impact of spreads.
7. What are charts?
Charts represent the aggregated outcome of market participants' trading behaviors. Each type of chart has its formation principles. Over time, each type of chart may mutate. The appearance of each standard chart pattern occurs with a certain probability. The key determinant of long-term survival in the market lies in whether one possesses the ability to understand existing chart patterns and adapt to new ones.
Similar to arbitrage strategies, a trader may profit by mastering an arbitrage technique, but over time, if the strategy is not adjusted or updated, it will lose effectiveness and fail to generate profits. A pattern trader who cannot adapt to changing patterns or understand new ones will eventually face failure. Arbitrage trading has a certain time sensitivity, as does pattern trading. This time sensitivity is relatively long, typically exceeding one year.
Trading ultimately comes down to the ability to judge patterns—accurately predicting their amplitude and boundaries. If someone’s ability to analyze and deduce patterns is too weak, even if they succeed with the help of textbooks or others, generally within one to two years, or a few years later, they will still join the ranks of failures.
In other words, even if you are a trend-following trader, if you cannot understand newly emerging patterns in the future, you will eventually be defeated by them.
The various ways mentioned above summarize the failures of trend-following trading. Going against the trend will inevitably lead to failure, but the vast majority of those following the trend will also fail. My viewpoint is simple: try to exit the market as much as possible. God is fair. To reap rewards in this market, the capabilities and efforts required far exceed your imagination. It is not true that simply following the trend guarantees success, nor does luck in learning winning techniques ensure perpetual gains.
The changes in stock chart patterns are much simpler, given the limited number of participants. If you truly cannot bear to leave the market, then turn to stocks. If you cannot bring yourself to leave, adopt a long-term strategy, use leverage below three times, and set wide stop-losses.
Editor/KOKO
