I. Sources of profit
Personally, as a trader, the first thing to figure out is what is the source of profit. After understanding this, you can clearly understand what kind of profit you want from each order. Only by understanding the purpose of the transaction can we treat the order differently in fund management and risk control, so as to improve our own transaction.
Here I divide the sources of profits into two kinds, one is directional income and the other is fluctuating income. These two benefits are not difficult to understand. The so-called directional income, that is, in the case of optimistic about the direction, place an order in the right position and wait for the direction of the variety to arrive, and get a certain income after holding it for a certain period of time; Fluctuation income is to place an order in the right place and wait for the opportunity of intraday fluctuation. Once it appears, it will appear after reaching a certain goal, and the trend of varieties is not the focus of attention.
The characteristics of directional return are obvious. First of all, it has a strong demand for direction. Only when investors see the direction clearly, place an order in the right position, and hold it for a certain period of time, can they get benefits. Among them, intraday fluctuations often make investors feel at a loss, and those who are not determined or have heavy positions will be out early. It is precisely because obtaining directional income requires a strong grasp of the direction. Therefore, if the direction is wrong, the position that was finally established may eventually be lost, and the bamboo basket will draw water with a sieve. Secondly, directional returns need to pay attention to the differences from volatile transactions. Investors who get targeted returns need to pay more attention to the fundamentals of varieties, because in the long run, the fundamentals of varieties determine the long-term trend of varieties, so it is inevitable for such investors to have a deeper understanding of varieties.
The characteristics of fluctuating returns are also obvious, some of which are opposite to directional returns. First of all, the demand for volatile income is not strong, as long as there is enough fluctuation in the session, as for the long-term rise and fall of varieties, you don't have to care too much. Of course, it also depends on the size of the fluctuation income. For investors who want to seize the large-band income, they should also consider the direction. Otherwise, if the risk control is not good, the accumulated profits may be attacked in the opposite direction; For investors who grab small-band gains, the direction is naturally smaller. As long as there are fluctuations that meet the target, you can make a profit, even if the direction is opposite, don't worry too much.
Therefore, the demand for the direction of volatility returns depends on the demand for the amplitude of volatility returns. The smaller the amplitude, the lower the demand for direction, and high-frequency trading does not even need to consider direction; On the contrary, the greater the amplitude, the higher the requirement for direction. Secondly, the fluctuation of volatility returns determines the trading frequency. The greater the fluctuation income, the lower the trading frequency. Conversely, the smaller the fluctuation income, the higher the trading frequency.
The operating requirements of fluctuating return and directional return are different, but they are not contradictory. They can have both, and they can get both directional income and volatile income. However, investors are required not to be confused and have a clear understanding of each transaction, otherwise it may get twice the result with half the effort.
Here, investors are required to have a clear understanding of these two types of transactions, what is the purpose of each transaction, and what is the profit to be obtained, so as to be targeted and concentrate on what you need to pay attention to.
Second, the probability theory of trading
Every transaction may be profitable or losing, more or less profitable, more or less losing. Whether each transaction is profitable or not is random, and so is the profit of each transaction. However, it is impossible for investors to make only one transaction. Therefore, for every investor, it is certain to regard each transaction as a whole, and its law may conform to the following two statistical laws in the statistical sense: large numbers.
(A) the significance of the law of large numbers in trading
Mathematically, the law of large numbers can be expressed as: when the number of experiments is enough, the frequency of events is infinitely close to the probability of events. When applied to trading, it can be understood that when the number of transactions is large enough, the probability of profit (winning rate) is infinitely close to the probability that traders can profit from the transaction itself. From this perspective, judging whether a transaction is good or not is not based on how well a transaction is done, nor is it based on how badly a transaction is done.
In the long run, a large number of transactions will naturally distinguish between good and bad investors' transactions. So, conversely, how to be a good investor or a good trader? Personally, I think a good trader should be like an excellent sniper, be good at waiting and adjusting his nerves, so that every shot is in the best condition and hits the target with great possibility, instead of shooting around like a submachine gun, scaring the snake and scaring off after the bullet hits the target. Therefore, a good transaction should be that every transaction should be taken seriously and then repeated.
(B) the significance of the central limit theorem in trading
The central limit theorem is mathematically expressed as follows: the sum of a large number of independent random variable sequences with the same mean and variance tends to normal distribution. And the average of this normal distribution is equal to the average of a large number of random variables. From this point of view, if investors want to get a positive average return, then from all transactions, at least they earn more money than they lose, which means that the average profit of each transaction is greater than the average loss. The implication is that the risk should be controlled well, and the profit of the application should be obtained as much as possible to avoid unnecessary losses, especially big losses, that is, making big money and losing small money.
It should be noted here that the statistical laws that constitute the central limit theorem still need to meet a large number of independent conditions. When applied to trading, the "many" conditions inherently require investors to have the resources to repeat a large number of transactions, that is, money. In fact, many investors in futures trading are just passers-by, and the time of "survival" is not very long, which also loses the basis for doing a lot of trading. Why doesn't "survive" for a long time? A very important point may be the heavy position, always thinking that the big position is not good. In addition, "independence" requires investors to have a heart that cannot afford to lose. Don't sigh because of the failure of a transaction, and don't get carried away because of the success of a transaction. These will affect your normal performance, so pay attention to your current trading and don't be disturbed by your previous trading mentality.
Third, the analysis of several trading models
There are many modes of buying and selling. Different buying and selling modes should cooperate with technology, fund management and risk control. Some buying and selling models contain the concept of fund management, so buying and selling models must cooperate in technology, fund management and risk control to win in the market, not just one of them. Let's first put aside the factors of technology, fund management and risk control, and only analyze the characteristics of different trading modes. There are different trading modes in the market. I personally summarized the following trading modes, of course, not limited to the following, which are widely used in directional trading.
If it has the following trends:
Figure 1: preset market trends
The first trading mode: point A is empty and held until point B is flat.
Figure 2: Schematic diagram of the first trading mode
Revenue: a-B.
Risk:
1, market judgment error, not as expected,
2, intraday volatility is too large, easy to leave early.
Features:
The direction demand is strong, and the intraday capital curve retreats greatly.
Operational requirements:
Accurately predict the market, and at the same time be patient and bear the psychology of profit taking.
The second operation mode: each high point is empty and the low point is flat, which is similar to band gain.
Figure 3: Schematic diagram of the second trading mode
Income:
(A-B 1)+(A 1-B2)+(A2-B3)+(A3-B4)+(A4-B).
Risk:
1, the market misjudged and failed to achieve the effect of high throwing and low sucking;
2. Early admission or early appearance, unable to achieve the expected profit; 3, easy to trade, frequent losses.
Features:
1, the requirement for direction is not very strong;
2. High transaction frequency; 3. Strong technical requirements.
The third mode of operation: it is divided into two funds, one is held at point A until it is closed at point B, and the other is closed when it is short on rallies.
Figure 4: Schematic diagram of the third trading mode
Income:
(A-B)+(a 1-B2)+(A2-B3)+(A3-B4)+(A4-B).
Risk: 1, market misjudgment, no directional return; 2. The expected fluctuating profit cannot be realized by entering or leaving the stadium in advance; 3, easy to trade, frequent losses.
Features: 1, not very directional; 2. High transaction frequency; 3. Strong technical requirements; 4, a sum of money to grasp the direction, a sum of money to grasp the band, position control, more flexible operation.
The fourth mode: point A is empty until point B is flat, and at the turning point of the low point, buy more to avoid partial withdrawal in the form of locking.
Figure 5: Schematic diagram of the fourth trading mode
Income:
(A-B)+(a 1-b 1)+(A2-B2)+(A3-B3)+(A4-B4).
Risk: 1, market misjudgment, no directional return; 2. It is difficult to accurately grasp the buying and selling points. Features: 1, not very directional; 2. High transaction frequency; 3. Strong technical requirements; 4. By locking to avoid retracement, the existence of directional positions can be maintained.
Fifth mode: backhand. At high altitude, there are many backhands on dips.
Figure 6: Schematic diagram of the fifth trading mode
Income:
(A-B 1)+(2 * A 1-B 1-B2)+(2 * A2-B2-B3)+(2 * A3-B3-B4)+(2 * A4-B4-B).
Risk:
1, it is difficult to accurately grasp the trading point, and it is easy to be wrong on both sides.
Features:
1, maximizing income;
2. The requirement for direction is not strong; 3. High transaction frequency; The requirement for technology is the strongest.
From the perspective of income, the above five trading modes belong to the fifth trading mode with the highest income and the first mode with the lowest income; From the risk point of view, the risk of the fifth mode is the biggest, and the risk of the first mode is the smallest; In terms of operation difficulty, the fifth mode is the most difficult and the third mode is the least. In terms of security, the third mode is the safest. No matter which mode it is, technology, fund management and risk control means are left here for the time being, so you must have matching technology, fund management means and risk control means to choose which mode, so that you can really beat the market.
Fourthly, the choice of arbitrage and hedging.
Arbitrage and hedging are two different concepts. According to certain rules, highly related varieties or contracts enter and exit at the same time to earn the difference between them, which is called arbitrage, and transactions between related varieties or contracts in the opposite direction are called hedging. Conceptually, the requirement of arbitrage is higher than hedging. Lack of arbitrage can not be called arbitrage, but it can be understood as hedging.
Arbitrage, in the final analysis, is a kind of speculation, and it is speculation on spreads. Under a certain concept of time, the trend of spread is more regular, so arbitrage is chosen to run the transaction. Of course, arbitrage itself can accommodate more funds, so the operation of large funds also needs to cooperate with arbitrage strategy. Hedging should be understood more as a means of risk control. If unilateral positions can control risks well, there is no need to use hedging to control risks. But sometimes, in order to reduce the number of stops or make the strategy hold more funds, hedging can be used to replace some stops or increase the capital capacity.
Five, a complete trading system elements
In the analysis of trading mode, fund management and risk control are repeatedly mentioned. In fact, a complete trading system does not simply know how to buy and sell, because trading is a probability game in the final analysis, and investors always have to deal with uncertainty.
From the perspective of buying and selling mode, you have chosen a buying and selling mode, which is basically unchanged in logic. In order to cope with the uncertainty of the market, you may need to change the details of the trading model appropriately, such as the expected profit board and the fine-tuning of the trading point rules. This is the requirement and result of dealing with uncertainty. Uncertainty is risk. Is immutable logic necessary? Personally, I think the answer is necessary. But can a fixed transaction succeed? The answer is basically impossible.
It is a common mistake to carve a boat for a sword, and it should be avoided. In fact, fine-tuning your trading model is a kind of practice, but it is still not enough. More importantly, investors should properly handle fund management and risk control. Fund management is a fault-tolerant mechanism, which serves the business model to better adapt to the uncertainty of the market. You can't place an order accurately every time, so fund management is necessary. Risk control is the core of facing market uncertainty. With it, traders can beat the market with buying and selling mode and change the market accordingly.
Technology is an auxiliary means to improve the accuracy of transactions. Technology is the core for newcomers to the market, but for long-term profit-seekers, technology has been imperceptible, and there is no need to concentrate on special research. Unless you educate others more, investors feel that they understand technology too deeply and admire it too much, thinking that they can beat the market with a set of technologies, so it is often counterproductive to learn various technologies. The more skills they have, the better, but the better.
In addition, the common mistake made by ordinary investors is that they are too eager to predict the market. They are studying whether this is the top or the bottom every day and so on. Of course, forecasting is essential, but after you placed an order, the market did not follow your forecast. What should you do? Do you want to feel that you have earned too little, and the power has come back after the heavy position? What should you do? There must be corresponding countermeasures here, otherwise investors should not place orders easily. With a mature trading model and certain means of fund management and risk control, will it succeed? The answer given is basically no.
In addition to the above, it is also important to have a good attitude. Mentality by going up one flight of stairs. All the above mentioned are equivalent to the material basis. Mentality is a superstructure. Only when the material foundation is handled well will the superstructure promote material development, otherwise it will be counterproductive. On the whole, a complete trading system should be composed of the following elements: buying and selling mode (strategy), fund management, risk control and mentality. Only by doing these four aspects well can we gallop in the market.