What are the core competitiveness of traders?
Many people are curious about what sets a successful trader apart from an average trader. What core skills do they possess that enable them to reach profitability?
As a self-taught trader for over a decade, I have been exploring, reflecting, and summarizing my experiences, taking a long time to gradually understand the essence of trading.
I believe that a successful trader is not as complex as people might think; in fact, they are quite simple. We all go through a period of chaotic thinking, pursuing many diverse things, and eventually, we untangle the mess bit by bit, returning to a state of simplicity to see through trading and get back to its core.
Today, I would like to share five core competencies that I believe a trader must possess. These are conclusions I've drawn from years of ups and downs in trading, and I believe they will be enlightening for everyone.
Core Competency One: The ability to simplify complex situations
Zhang Yiming once said, "Your understanding of a matter is your competitive edge in that matter."
When we think about things, we often tend to overcomplicate them. We frequently overlook the simplest and most direct path, choosing instead a more complex one that seems more prestigious.
We also set many rules and constraints, complicating what was originally a simple thought process. What was a straight path to the exit, we have drawn a maze for ourselves.
A friend once asked me: Can I trade with a daily chart, 30-minute, and 5-minute charts for medium to long-term strategies?
I replied: The span from the daily chart to the 5-minute chart is a bit too broad. Entering with a 5-minute chart to catch the trend of the daily chart offers a very high reward-to-risk ratio. However, when the daily chart is in a consolidation phase, you may face a series of losses.He further stated: "Following such an arrangement, it might be possible that there is no opportunity to place an order for a week, and perhaps only a few chances in a month. This is where the problem lies. Isn't waiting for opportunities the essence of medium to long-term trading? It's quite normal for medium to long-term traders to have no opportunities in a week. Wanting to trade medium to long-term and also expecting a high frequency of trading opportunities is inherently illogical; one cannot have it both ways in trading.
However, such situations are quite common in trading. Some people engage in intraday or range-bound trading, yet they wish to hold onto the large profit spaces of daily charts. Some aim for high reward-to-risk ratios in trend trading, yet they desire the high success rates of short-term trades. There are also those who engage in speculative high-risk trades, yet they seek stable daily profits. There are many such examples.
Most of human suffering stems from wanting to have it both ways. Many people overly idealize and complicate trading, desiring everything, which leads to getting nothing. Making choices is crucial.
After so many years of trading, my understanding of it is quite simple:Focus only on one type of market trend, engage in only one type of trade, and study only one type of market trend. All other market trends are irrelevant to you. Do not think about them, do not envy them, do not be greedy, and certainly do not get entangled. Simply hold on to the market trend that belongs to you; it's that simple.
If your thinking is constantly at odds with itself, pursuing an overly idealized trading technique or a complex trading path, then your thoughts will eventually become as tangled as a ball of yarn, increasingly difficult to unravel.
Each of us may go through this process of complicating our thinking, desiring many things. Some people can simplify the complex, returning to a simple heart after experiencing much, while others may continue to be entangled in complex thinking, unable to break free.
Thus, we can experience the process of complex thinking, but we must have the ability and courage to return to simplicity. This is the necessary path to profitability.
Core Competitiveness II: Sufficient Trading Skills
What I am discussing here is "sufficient" because humans are not omnipotent. You cannot master every skill; it is enough to thoroughly understand one type of asset, one type of market trend, and one type of technique.
Perhaps it is a matter of perspective, but as a mature trader looking back, I believe that a trader must have their own trading method, which has been verified, preferably with their own trading system, to ensure a steady progression in trading.
I did not originally consider this a core competitiveness because, like a chef making braised pork, if one does not know how to cut the meat, how to caramelize the sugar, how much seasoning to add, or how long to stew, then how can one produce a satisfactory dish of braised pork?
However, in my interactions with many friends, I have found that at least 90% of traders are trading based on feelings, without a complete, clearly defined, and verified effective trading system, or even the simplest trading standards.
This is a very alarming situation.Sometimes, when one feels that a technical indicator is effective, they use it with great joy. After a while, when the indicator fails, they switch to another with frustration.
When a trading strategy makes a profit for a short time, one may become arrogant, but when it starts to lose, they become gloomy, never having tested and verified the effectiveness of their trading strategy, relying entirely on feelings.
I also recall my own self from years ago, who knew nothing about trading systems. It was only after suffering significant losses that I realized the importance of this aspect. It was through my own attempts and verifications that I truly understood what constitutes proper trading.
Therefore, to develop a core competitive edge in trading technology, a change in mindset is necessary.
Firstly, you must understand that trading is not an easy task, just like how many people now think live-streaming sales are easy, only to find out that every step they take leads to a pitfall.
All money-making endeavors are not easy and require hard work and in-depth research. Industries that seem profitable without one's own experience often hide the hardships and tears that others have endured.
To make money in trading, one must be prepared to put in the hard work, such as thoroughly researching a particular product, market, trading pattern, and technique.
For example, when we deal with a breakout from a rectangle consolidation pattern, if you have conducted hundreds of backtests, you will thoroughly understand the details of the breakout, and you will have a deep understanding of this pattern, including its numerous variations.
When encountering it in actual combat, it almost becomes muscle memory, allowing you to judge at a glance, giving you an advantage over those who impulsively enter the market.
So-called trading skills, market sense, and faith in trading are all honed through such repeated practice, not innate talents bestowed from above.Core Competitiveness III: The Ability to Learn Independently
Most traders are lazy, including myself in the early days.
The thing I liked to do the most, in simple terms, was to get something for nothing.
I wanted to achieve the greatest benefits in the fastest way possible. For example, I would look for a magical indicator, an invincible trading system, preferably one that could multiply my profits by 5 or 10 times in an instant. I also liked to seek help from others, preferably someone who could lead me directly, and I could just sit back and wait for the money to roll in.
But what was the result? I believe everyone can see clearly when they are onlookers, but when they become part of the situation, they can't see it clearly.
Two years ago, a friend asked me how to choose between large and small cycles, and today, two years later, he asked me the same question.
My answer then was similar to my answer today; the size of the cycle should be combined with one's own trading habits and also with other technical criteria of the trading system. It cannot be discussed in isolation; one must go through a review and test it themselves.
Two years later, he is still stuck on the same issue, and there are many traders in the same boat.
The trading industry is very special; it is not like studying in school where there are teachers to supervise you, exams to push you, and rules to constrain you. In trading, all learning depends on oneself, and self-awareness is the most basic ability.
There is a type of trader that I also greatly admire.They always approach discussions with me in a learning attitude, and when I provide an answer, they will independently verify the correctness of the answer. In this era of information explosion, any trading technical issues can be found online in articles or video explanations, and they will even personally test the validity of a viewpoint on a demo account.
Of course, this process may encounter a lot of incorrect information and useless methods, but the process of verification itself is also a learning process. It is impossible to avoid pitfalls in trading; stepping into them is the norm.
Therefore, the ability to learn independently is extremely important. They dare to humbly ask for advice, boldly doubt, and seriously verify. These are rare and valuable qualities.
Core Competitiveness Four: The Ability to Maintain Rationality at All Times
This ability is difficult, but very important.
Because we are all human, we all have emotions. It is a ruthless thing to demand that a person maintain rationality at all times, even to the point of abandoning humanity.
But the trading industry is just like this; it does not allow you to be emotional, nor does it allow you to get carried away by emotions, because once you do, it's over. If you have emotions in other aspects of life, at worst, you may not do things well, but getting emotional in trading can directly lead to significant losses that are irreparable.
For example, if you encounter a loss and get emotionally carried away, your judgment of risk becomes severely biased, you start trading frequently, and you start to bet heavily.
Since you are no longer rational, even if you bet right, you won't be able to hold on, and if you bet wrong, it will lead to even greater losses. Trading without rationality is an abyss of losses, and once the storm has passed, it leaves endless regret and pain.
Therefore, maintaining rationality and emotional stability at all times in trading is a very important core ability. Rejoicing moderately when profitable and being angry within limits when losing, keeping oneself always clear-headed, is the key to making the most correct judgments.How can one develop the ability to maintain rationality?
Firstly, one must understand oneself.
Some people are naturally stable in character. I have such individuals in my team. They tend to be introverted, speak less, and have strong focus. When we first started trading together, he almost never made impulsive trades. When discussing issues, he can also maintain rationality at any time. People with these personality traits possess innate rational thinking.
However, such individuals may also have their drawbacks in life, such as being less romantic and having poorer empathy, but this personality is very suitable for trading.
If you are such a person, you have an advantage in trading. You should grasp your own trading rhythm and form your own trading strategy for execution.
But in reality, most people are more emotional and impulsive, with poor self-control. When their desires are ignited, they may not even have the ability to recognize it, let alone control it.
If you are such a person, you need to learn to coexist peacefully with your own human weaknesses.
For example, do not take on too heavy positions normally, earn the money you can within your comfort zone of human nature, and do not harbor too much greed, otherwise, you will be counterattacked.
Additionally, you can create a rational trading environment, such as classifying your trading system absolutely, so that you have no opportunity to participate in subjective judgment. When buying and selling, only look at technical standards and do not make subjective judgments. All trading standards are clearly defined, which can reduce the chances of being emotionally overwhelmed.
Emotion is something that is invisible and intangible. If we cannot control it, we can use physical methods to restrain it, and the effect is quite good.Core Competency Five: The Ability to Live a Disciplined Life
I often share trading insights and personal fitness updates, such as gym workouts and outdoor activities, on social media platforms like WeChat Moments. Some may consider these posts insignificant, questioning why one would allow such trivial matters to distract from the focus needed in trading. They argue that the essence of trading lies in concentration, so why divert attention with these everyday affairs?
Trading differs from other industries. For instance, if you run a coffee shop, you might face numerous competitors in the vicinity, compelling you to constantly think about improving your coffee, marketing strategies, and customer service. The competitive environment in such cases pushes you to evolve and excel.
However, the trading market is vast, and there is virtually no competition among individual traders. We, as traders, are essentially in a game with ourselves. No one will remind you not to stay up late, as it could affect your trading performance the next day due to fatigue. No one will caution you against becoming engrossed in games when you should be reviewing trades, or remind you that the trading books you bought have been gathering dust and it's time to read them.
Many believe that trading, with its flexible hours and no need for clocking in, is a relaxed endeavor. This is a misconception. Trading is a high-risk profession that requires serious commitment. Every move you make directly impacts your financial well-being. Maintaining a clear mind and a healthy body is fundamental to successful trading.
It is not something you can excel at after pulling an all-nighter and then operating in a daze the next day.
Moreover, most of us are not solely traders; we have other social roles as well. We might be fathers, children to our parents, or husbands to our wives. We face numerous daily chores and responsibilities.
Trading is not a utopia for escaping reality. While it may add some excitement to our mundane lives, our ultimate goal is to make money, not to play games.Trading is not something that is completed in a day or two; it is a protracted battle, a marathon. Our ability to maintain self-discipline and a good mental state in the monotonous daily trading is the foundation for doing well in trading, and it also allows us to face life better.
This point is often overlooked by many people, but it is indeed very important and one of the cores of our successful trading.
I will stop here for today on these core competencies. Although they are not comprehensive enough, they are absolutely sincere suggestions. Everyone is also welcome to write down the core competencies they think are important in the comment section, and we can learn together.