Trading Insights

Some insights on trading: (For reference only)

The world’s greatest investment experts are called “financial crocodiles.” Why not “financial tigers,” “financial lions,” or “big fish”? It’s because, although lions and tigers are strong on land, they expend energy when hunting and can get injured when facing strong opponents. Crocodiles, on the other hand, are patient, smart, and cold-blooded. They ambush and wait for days or even weeks at the strategic watering holes where all animals must pass (( water sources )). If they succeed, they swallow their prey; if they fail, they immediately retreat into the water (( high return, low risk )).

Crocodiles may appear to have short legs, but they can actually run faster than humans on land. Still, crocodiles give up hunting on land (( because it consumes energy and carries risk )) and focus on waiting in the water. Traders should be like crocodiles—only do what they are good at to ensure long-term survival like crocodiles (( crocodiles have survived since the dinosaur era for over 200 million years )).

Their hunting strategy seems passive, but it’s the most effective: capturing prey with minimal energy expenditure and using the lowest cost for the highest profit. This is what top financiers and crocodiles have in common.

The core essence is: cut losses short and let profits run. In other words, cut losses quickly and let winners grow. This means starting with small positions, adding to winners as the trend strengthens.

Find a simple indicator to distinguish between bullish and bearish markets. In a bull market, only go long and open positions at classic top signals. Wait on the path of the trend, and enter at key points. Don’t focus too much on win rate; it can’t be very high, nor does it need to be. The key is to enter at points with a large potential risk-reward ratio—where the stop loss is small and it’s clear if you’re wrong.

Typically, enter with an initial position at the bottom or early trend stage. Always put risk first. The initial position should be able to withstand the largest historical drawdown, and set a conservative stop loss on top of that. This is the number one principle. If the key point is broken, stop out—no exceptions. If the price comes back, you can look for another entry. Never hold onto a losing position out of hope.

Needless to say, adding to losing positions is a foolish move. Adding to winners during pullbacks is the core to making big money. After the price rises as expected and then pulls back, add to your position at support or once a new high is broken.

Use a pyramid method to add to positions, moving up your stop loss accordingly. Move it to the new key point so your initial position is safe, leaving only the added position at risk. If you fail, stop out and wait for the next opportunity. If the price continues upward, hold on tightly, keep waiting for a pullback to add more, and continue moving your stop loss up.

Take profit: never exit lightly. Patiently wait for a classic top signal or divergence before exiting, either in batches or all at once. Ideally, exit all at once so you can require yourself to wait for the highest-probability top signal. Floating profit will definitely experience pullbacks; accept this and don’t try to sell at the very top. Occasionally, you’ll encounter a V-shaped reversal where most or all of your floating profit evaporates. You can optimize this to suit yourself, but the best way is to accept it calmly, because that’s not the kind of market move you’re trying to capture.

These are the core principles for winning in trading. As long as you follow these principles, there are many methods and indicators you could use—there is no “best,” only what suits you best. You need to find it in practice.

As long as you master and consistently follow these principles in practice, even with a very simple indicator, disciplined consistency will make making money a simple and even boring thing. Overcome yourself—overcome human nature!