Dr. Song's "High-Dimensional Band Trading System" series content

In the actual operation process, the market is unpredictable, and no one can judge with certainty whether it will rise or fall by one hundred percent. It is always influenced by various factors such as politics, economy, technology, and the psychological effects of the participants, leading to significant fluctuations in the market.

So, how can we seize the opportunity? How can we profit in a stable manner?

How to grasp the market trend and play a very important role is that the fundamental analysis determines whether to do it or not, while technical analysis determines when to do it. By combining these two, we integrate trading.

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1. Risk Control

Of course, whether it is fundamental analysis or technical analysis, we must always prioritize risk control in our trading process. Before entering the market, we should not think about how much money I can make or how much profit I can gain. Instead, we should first make an assumption: what if I lose money? What are the countermeasures after a loss?

The stock god, Warren Buffett, once said during the trading process: We must control investment risks as much as possible, and preserving our principal is our primary concern.

So, I always emphasize one point to everyone - do not turn a profitable trade into a loss.

The market offers you many opportunities, do not think that this opportunity is your only chance. For example, during a decline, when you see a peak and then a retreat, as your profits are gradually eroded, and you are reluctant to sell when you are losing money, eventually turning into a losing trade, this is a very unsuccessful operation.

A highly skilled mountain climber grasps every detail bit by bit, which allows him to conquer peak after peak. Our trading is the same; we must make every entry and every exit, step by step, with a scientific, reasonable, and standardized judgment, to perfectly present a trade, without holding onto profitable trades and being reluctant to let go of losing trades.Images are from the internet.

2. Capital Management

Capital management is particularly crucial. When the market is unfavorable, we must operate with a light position and follow the trend.

How do we follow the trend during a downturn? When we are looking for a bottom rebound, once we hit resistance, it is almost always correct to sell, which is called following the trend. You hit the resistance level above, you sell. Similarly, during an uptrend, every time your operation touches the support level below, you buy.

In the actual operation of position building, adopting a pyramid-style position increment is a more scientific form of capital management. What is pyramid-style?

I start with a one-tenth position, and it falls. After it falls beyond a certain proportion, I buy with a two-tenth position below. That is to say, during the decline, the weight of your position should be more than one-tenth. Your one-tenth has been halved, and your two-tenths further lower it. As it falls further, my original one-tenth plus the additional two-tenths now make three-tenths. During the next decline, we should add a three-tenth position, thus lowering the cost. This pyramid-style, progressive position building method will reduce your risk.

However, it is important to note that the pyramid-style increment method must be used in line with the overall trend, and the level of operation you are corresponding to must be in the trend. It is not advisable to do this against the trend.

If it is against the trend, you should stop the loss in time and leave the market, rather than replenishing the position - making the mistake worse. These are some of the methods and concepts I generally adopt in actual operation.

In terms of tactics, operations such as closing or replenishing positions should not be used indiscriminately, but should be used cautiously, otherwise your losses will increase. This is what we are talking about capital management.

3. How to Control Mentality?Everyone has greed, and in the trading process, it all boils down to two points: human greed, fear, hesitation, decisiveness, caution, and so on. These are the inherent traits of human nature. By distancing yourself from the herd and standing on the opposite side of the majority, you have already won half the battle.

People often don't fail because of their technical skills or capital management; it's usually due to their trading psychology. When the market falls, fear sets in. A position that was originally correctly judged and aligned with the trend, a daily long trade, may cause you to exit because you can't stand the decline.

Due to such fear, you might miss out on a good trade, a long-term position that could have yielded long-term profits, simply because you couldn't hold on.

Greed can also be a factor when you hold on to a position, but in the wrong direction. You've made a 50% profit, yet you still want 100%. Without basing it on an analysis of the market trend, excessive greed often leads to disappointment. When you aim for 100%, it might drop by 10%, and when you've made 40%, you think, "I didn't sell at 50%, so why should I sell at 40%?" You decide to hold on.

Greed is often accompanied by a sense of luck, which leads to holding on longer and watching your profits diminish, eventually resulting in losses.

Therefore, it is crucial to recognize human nature, avoid the herd mentality, and position yourself in opposition to the majority. By doing so, your chances of profiting in the market are already over 50%.

A good trader must first establish their trading philosophy. The second step is to cultivate your mindset; you must be patient and overcome your psychological fluctuations. Once your trading plan is in place, execute it strictly, rather than arbitrarily changing it due to the fluctuations in your emotions while monitoring the market.

Images are sourced from the internet.

4. Techniques and Experience

During the trading process, it is important to choose an analysis strategy and technical indicators that suit you. Even if others use them well, if you are not skilled or lack experience, they will not become yours.The method I often use is Bollinger Bands combined with a 144-day moving average as the main chart, with MACD and KDJ as the secondary indicators, and sometimes I use CCI as well. In fact, it's quite simple, combined with my daily experience.

For example, as we discussed in the previous section, a slow rise corresponds to a sharp drop, and similarly, a sharp drop corresponds to a slow rise. These are all forms of energy exhaustion. Therefore, in trading, it is necessary to accumulate experience over time, to undergo professional training, and to ensure that there is enough time. Without the guarantee of time and long-term accumulation, even if we are not geniuses, smart people still need time.

That concludes all the content for today, and we welcome everyone to follow, like, and share!