Any trading strategy is based on a certain market analysis and is consistent with your analysis method. The so-called trading sense and intuition cannot be used as guidance and basis for trading.
I was also lucky. I once made 90% profit in three months by relying on the market sense. After my confidence skyrocketed, I placed orders like crazy, thinking that good luck would always be with me, but my position was liquidated.
I didn’t believe in the evil at first. It was only after my positions were liquidated that I discovered that foreign exchange trading cannot rely solely on trading sense. If you want to make a profit, you must have a complete trading strategy.
Trading strategies must be combined with analytical methods. Trading strategies without analytical methods have no practical significance.
Many trading experts regard bottom-picking and top-picking as profound failure lessons and are excluded from the trading strategy, but for me, bottom-picking and top-picking are the foundation and key.
Since my analysis method is mainly based on judging the market turning point, my trading strategy is very different from the trend trading strategy. The steps may be the same, but the content is different.
My trading strategy consists of several steps: trial trading , bottom position, lock order, adding weight, and closing position.
1
trial trading strategy
trial trading strategy is a position opening strategy adopted when the turning point of the general trend may occur earlier than our prediction. The position of and is extremely light, and the opening capital is controlled below 10%, usually only 5%.
In our analysis method, the turning point of the trend is generally certain and will generally appear as scheduled according to our predictions.
Sometimes, due to a certain market turning point, the position it appears is beyond our expectation, and we cannot be sure whether its turning level has been improved, which means that the general trend turning point may occur earlier than our prediction.
Since it cannot be completely determined to be the turning point of the general trend, a trial trading strategy is adopted, and the limit price is set at the stop loss position at this turning point.
Stop loss is not a trading strategy, but a trading principle that runs through all trading.
No matter how confident we are in our own analysis methods, there is no guarantee that we can maintain an objective and calm attitude at all times.
When we make a mistake, we use stop loss to correct it. Only stop loss can prevent a fluke mentality.
is a trial market, so be ready to escape from your position at any time. Escape is an important preventive measure in the trial trading strategy. There are two types of position escape: one is stop loss and the other is take profit.
Since the trial market is not a position opened at a definite turning point of the general trend, the turning point of the general trend must be confirmed at the next turning point. If this turning point does not strengthen the turning point of the general trend, but strengthens the previous trend, take profit-taking measures.
trial trading is not for profit, the key is to calm your mind. Regardless of whether the test is successful or not, it has a depressurizing effect on alleviating worries about gains and losses. Sometimes, losing an important opportunity hurts more than making a mistake.
2
bottom position strategy
bottom position strategy is an undercover or top-down operation strategy carried out when the general trend turns. The opening capital is more than 10%, generally controlled at around 20%, and the limit price of the turning point is used to stop the loss.
Trial trading and bottom position are both opening operations, but the difference is very big. There are four main differences:
- have different judgments on the turning point of the trend. The trial market is based on the judgment of possibility, and the bottom position is based on the judgment of inevitability.
- have different mentality. Although the trial market has the possibility of becoming a bottom position, we are still ready to escape from the position at any time.Although the bottom position also emphasizes stop loss, stop loss is only a preventive measure. No matter the ever-changing market situation, it will never stop making a profit.
- has different warehouse volumes. The trial position is light and the bottom position is heavy. The bottom position is 4 times that of the trial position.
- has different purposes. trial trading is mainly to calm the mentality, and the bottom position is to make profit. The bottom position plays a decisive role and is the basis and confidence for subsequent operations.
The bottom position operation generally implements the layout strategy of entering the market in batches in the turning area.
Generally speaking, there are not many single-day V-shaped reversal patterns when the general trend turns. Most of them will form a large or small momentum-building process. Sometimes this process is quite long and boring.
The bottom position operation has a heavy warehouse volume. If you invest in it all at once, the psychological burden of enduring this long process will be heavier. Therefore, the layout is usually completed in three times.
- entered for the first time on the turning day, and the capital was 50% of the bottom position.
- entered for the second time at the turning point of the retest, and the capital was 25% of the bottom position.
- entered for the third time on the breakthrough day of the turning trend, and the funds were the remaining 25% of the bottom position.
If a single-day V-shaped reversal pattern occurs, the bottom position is only the position that enters the market for the first time on the turning day, that is, 10% of the total funds, and the bottom position will not be increased.
Although the bottom warehouse volume cannot reach the planned target, and the subsequent warehouse receipt layout will also be reduced accordingly, this is a principle that must be followed. So I don't like V-shaped inversions. Although V-shaped reversals make money quickly, V-shaped reversals make less money.
Some turning areas do not take long to run. The smaller the level of forces, the shorter the running time. However, for some super general trends, especially bull bottoms, the turning area runs for a very long time.
Therefore, in the process of holding on to the order, you must have the mentality of perseverance to the end. After setting the stop loss position, no matter what the wind is, I will not move. Sakata's tactics 's "Stand still as a mountain" is the mental method that should be used in this state.
If short-term trading is like blitzing , seizing the best opportunity, sealing the throat with a sword, and leaving with one blow, then long-term trading is like a protracted war, a long-term struggle of strategy, courage, confidence, and will.
Especially in the bottom position stage, due to the lack of protection of floating profits, only the stop loss price serves as the psychological defense line. Without the determination to "stick to the stronghold", it is difficult to achieve much.
Many trading strategies that follow the trend use the breakthrough as the opening point. On the one hand, they have to wait until the trend is confirmed, and on the other hand, they want to avoid this arduous and excellent process of "holding on to the strong city". This is probably the shortcoming of being undercover and staying on top.
3
Hedging strategy
In my opinion, there are two kinds of hedging: one is active locking, and the other is passive locking.
- Passive lock-up: was forced to lock-up because the order was made in the wrong direction in order to prevent the loss from continuing to expand.
- Active lock-up: is the opposite. It is a lock-up operation to lock in profits based on the judgment that there is a secondary reverse movement in the market outlook.
unlocking is a difficult problem for passive lock-up. Taking a passive lock-up operation instead of a stop-loss operation shows that you are not clear about the market outlook or have a lucky mentality.
Stop loss is a quick way to cut through the mess and you can start over; while passive lock-up puts a psychological burden on you, which makes you worry about gains and losses.
Therefore, the best strategy is to chop rather than lock, even if you chop wrongly, you still have to chop. Our lock-up operation is active lock-up.The reason for adopting an active lock-up strategy rather than a profit-taking strategy is that the lock-up strategy has more advantages:
- has kept the bottom warehouse order, which has a psychological advantage.
- Bottom warehouse receipts with floating profit generally will not be easily closed. When adding more money, the floating profit of the bottom warehouse receipt is also needed for psychological support.
- has an advantage in cumulative position, and the profit margin of locking is greater.
- After closing a position and then entering the market, a new order is processed. The position size of the new order must strictly abide by the risk control regulations, and the opening funds cannot exceed a certain ratio. After the
lock-up operation is completed, since the bottom position is still there, you can add more funds, and the proportion of funds can gradually increase. - The distance between the two positions will become wider and wider. Even if the closing operation strategy includes multiple reverse operations to make profits, it will still be inferior to the locking operation in the end. The longer the trend continues, the greater the profit gap between the two.
Of course, if you have a strong mentality and self-control, you can also increase the position of the new order after the closing operation to the accumulated position added after the locking operation. However, this kind of operation tramples on risk control rules, and the more successful it is, the more it will encourage the expansion of greed.
The luck of one foul will lead to the luck of multiple fouls, and eventually the situation will get deeper and deeper. In the risk market, trampling on the rules is tantamount to digging one's own grave.
The hedging strategy has two purposes.
- is not for profit, just to avoid the ups and downs of mentality in the volatile area.
- Maximize profits and divide long-term operations into bands.
It is relatively easy to achieve the first goal. There is no need to worry about the lock position, just lock the profit and unlock it until the shock is judged to be over.
It is not so easy to achieve the second goal. First, you must determine the two extreme positions of the oscillation box, and then perform locking, unlocking, and even adding operations near these two extreme positions.
This has higher requirements on your analysis method.
Sometimes, the money earned from the lock-up operation will exceed the trend profit, but without the protection of the trend profit (floating profit at the bottom position), it will be difficult to succeed in the lock-up operation. Therefore, no matter how hard it is to hold on to the bottom warehouse, it is worth it.
4
Overweighting strategy
If you don’t know the harm of overweighting, you don’t know the benefits of overweighting! From a certain perspective, overweighting is more difficult to operate than placing a low position.
For our analysis method, the difficulty of bottom position operation is not in judging the turning point of the general trend, but in the process of holding on after entering the market. The difficulty of overweighting lies in the timing of overweighting.
Sometimes, the trend runs in twists and turns, and if the position of overweighting is improper, you will be passive in the rapid fluctuations of today's high limit and tomorrow's and lower limit , and even the floating profit of the bottom position will be swallowed up and turned into a floating loss.
Sometimes, the trend moves vigorously and vigorously, and good opportunities are missed because of waiting for a good market entry position.
Therefore, the trend’s movement rhythm is very important for overweight operations.
There are two coding methods: one is the point method and the other is the morphological method. Each has its own merits.
- point method: add one code according to how many points the trend rises or falls. Points are fixed. Different varieties have different fixed points. The advantage of
is that it is helpful to grasp the momentum of fast movement. The disadvantage is that you need to have an unswerving and stable mentality in the face of shocks in the twists and turns of the trend.- pattern method: is a market pattern overweight that operates according to the trend. Trends are made up of secondary boxes. The morphological method generally adds weight once to the top and bottom of the oscillation box.
- In an upward trend, after determining the box body, first increase the price at the bottom of the box, and then increase the price once when the top of the box breaks through. In a downtrend, after determining the box, add weight once at the top of the box, and then again when the bottom of the box breaks through. The advantage of the
- pattern method is that the adding position is better and it is easy to stop the loss. The disadvantage is that it is difficult to grasp the trend of rapid movement.
The overlay amount of the two methods is the same, and it is in a pyramid layout. The bottom position is the bottom of the pyramid, and it decreases in sequence according to the .618 golden ratio.
Our coding strategy adopts the morphological method. However, in order to better grasp the rapid movement trend, after judging the general trend turning point, the first thing to solve is the trend movement pattern, and formulate an overweight strategy based on the trend movement pattern.
Whether it is a fast-moving trend or a trend with twists and turns, its occurrence, development and end all run according to a certain market rhythm. Important top and bottom turning points generally fall on the rhythm point.
Whether it is locking or increasing, the market shape is only one of the basis for judgment, but to find a better entry and exit position, it must be operated in conjunction with the beat point.
beat point is the most critical basis for judgment. Beat points are the market's most important support and resistance levels.
- In an upward trend: If the beat point is at the bottom, it will become the driving force for the trend to advance; if it is at the top, it will become the resistance for the trend to advance.
- In a downward trend: The bottom beat point and the top beat point have exactly the opposite effects on the trend in promoting and resisting it. Under the observation of the rhythm point, the market pattern of false breakthrough of will be revealed.
Therefore, the stop loss operation after adding weight is generally not determined based on the market shape, but based on the market rhythm. The limit price of the tick point is the stop loss level.
5
Closing strategy
In fact, for our analysis method, the closing strategy is not important.
Before a trading cycle unfolds, we have a rough grasp of the entire trend based on long-term market analysis and judgment. As the trend continues, it will become increasingly clear when the general trend will finally turn.
Therefore, closing a position is just the natural end of a scene.
From the beginning to the end of any trend, there is a process of gaining momentum, breaking through, consolidating, sprinting and dying. However, sometimes, death does not occur before the general trend turns, but after it.
The key to judging whether a trend has ended lies in the market rhythm of the trend. When a market rhythm is completed, a turning point in the general trend is naturally approaching.
Therefore, closing a position is not about strategy, but about analysis.
If analysis is the sword technique, then strategy is the mental technique. The unity of sword Zen lies not only in your heart, but also in your sword. What kind of sword technique can match what kind of mental technique, rather than having the mental technique first and then matching the sword technique.
These trading strategies are just for your own swordsmanship, they are still quite rough and need to be tempered and refined through actual combat.
6
Finally
Yue Fei has a saying: The beauty of application lies in one intention. Strategy is dead, just like the art of war, it is just a framework of some basic rules. The key to whether you use it well or not lies in your realm.
Regarding the market situation, there is a state of looking up, a state of looking down, and a state of looking down.If you can achieve the state of overlooking and transcend market fluctuations, what else can't become your weapon?
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