Many people believe that investing requires a comprehensive knowledge of everything from astronomy to geography.
One must understand finance, economics, and policies.
Then there are exchange rates, interest rates, commodities, currencies, finance, accounting, and so on.
In addition, there are various technologies, main forces, market manipulators, northbound funds, golden crosses, and death crosses, etc.
I do not deny that investing is very challenging to a person's comprehensive cognitive abilities.
However, the act of stock trading is actually not the same as investing.
It is not necessarily the case that the more you know, the more you earn.
In the stock market, the more refined your knowledge, the higher the probability of making money.
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It is always the case that "a single skill can conquer the world."
This does not mean that being proficient in everything is bad, but being proficient in everything does not necessarily mean that you can defeat those with unique skills in the stock market.What we mean by "doing subtraction" has two aspects.
The first aspect is to abandon the illusion of wanting both.
The so-called wanting both refers to the idea of doing short-term, medium-term, and long-term investments, and wanting to make money in every possible way.
This kind of thinking is actually unrealistic.
First of all, you only have one principal for investment, how can you make three times the money.
Sometimes you think that hitting the board is good, sometimes you think that making waves is also good, and sometimes you envy those long-bull stocks.
Unfortunately, it is impossible to use multiple strategies at the same time in investment, and you will definitely be in a mess.
The illusion of maximizing the utilization rate of funds is basically impossible to realize and has no value at all.
The so-called doing subtraction is to clarify your own way of making money, and to determine what you want to do.Find your own major trading direction, and that's enough to earn the part of the money you can earn.
The second aspect is to simplify the trading principles.
We need to pay attention to many points, but it is precisely because of the many points of attention that lead to hesitation in trading.
Having multiple criteria is, in some ways, a good thing, but from another perspective, it can also be a bad thing.
When selecting stocks, we can be moderately cautious and stricter.
But when buying and selling, the standards set should be particularly simple to facilitate our own execution.
The dimensions for measuring the trigger of the trade should be as few as possible, because the more there are, the more chaotic it becomes.
This is like, if you are doing short-term trading, you must stop losses when it falls, and never hold on to the illusion of medium and long-term.
The so-called simplicity is to help us achieve our trading results faster, better, and more effectively.
Keep reducing the rules one by one.The stock market gives us the feeling of being unpredictable, which leads to the difficulty in our trading.
Because we have no idea what will happen tomorrow.
Precisely because everything is possible, many investors become confused when trading.
Especially when different signals give you completely different hints, it is easy to be at a loss.
For example, during a decline.
For short-term trading, the capital has fled, and the probability of short-term weakness is very high. The conclusion is that you cannot buy, and even need to stop loss.
For long-term trading, the stock price is lower, the valuation is lower, and the cost-effectiveness is higher. The conclusion is to buy more as the price falls.
The same situation corresponds to different trading attitudes and handling methods, because the strategies and time periods used are different.
Once things are complicated, decision-making becomes very troublesome, and it is easy to make mistakes.
For example, short-term traders should not consider performance, just need to grasp the theme and hot spots.For example, when considering long-term investments, the main focus should be on performance rather than technical patterns, as short-term fluctuations do not affect long-term holding.
Eliminate the items that do not conform to your trading principles by subtraction, one by one, because they have little value and are more of an obstacle.
Why is precision the key in the stock market?
There are several reasons for this.
First, there is no absolutely effective skill.
The stock market is a game of probability.
Tomorrow is unknown and cannot be accurately predicted.
All stock trading skills are relatively effective, not absolutely effective.
To put it bluntly, stock trading is a game of probability.Good trading patterns have a high success rate.
However, for short-term trading, the success rate is definitely not high, and the number of times skills fail will be more.
The more frequent the trading method, the lower the success rate, but theoretically, as long as it exceeds 51%, you can make money.
But this does not mean that if you have three or five skills with a 60% success rate, when combined, you will have a 70% or even 80% chance of winning.
It is better to find a direction that is easier to understand and more suitable for trading, rather than setting various dimensions.
Secondly, single-dimensional techniques are easier to delve into.
All methods require practical experience to gain true knowledge.
That is, all our trades are a series of accumulations that make our skills more mature.
This is like when studying, some people are good at all subjects, while others specialize in one subject.
If the exam results are not calculated by the total score, but by the highest score in a single subject, wouldn't investors who specialize in one subject have a greater chance of making money?Investing is like that; learning a bunch of superficial skills can actually hold you back.
It's better to have one skill rated at 70-80, rather than a variety of skills all rated at 40-50.
Moreover, all abilities must be explored and cultivated through one's own practice, bit by bit.
Thirdly, concentration of energy contributes to the success of investment.
Most retail investors are not full-time stock traders; they don't have that much time and energy.
Just keeping up with the news and understanding why the market rises or falls can consume a lot of energy.
Not to mention delving into research.
How many retail investors have carefully read a complete performance report of the stocks they have bought?
How many retail investors will follow and review the daily situation of a stock over the long term and keep records?
How many retail investors will review their own transactions repeatedly to improve their grasp of buying and selling points and correct their trading methods?More often than not, people just look around here and there, listen to various voices, and then it's over.
This is very detrimental to one's growth, and it can also be very distracting, making one feel very tired.
Individual investors often feel that the more they learn, the higher the probability of losing money, but in fact, it is because they have not mastered a skill thoroughly.
True technicians never pay attention to market news, only focusing on the trading board.
And true value investors never pay attention to short-term fluctuations, only focusing on changes in the fundamentals.
Focus on your own trading model, trading principles, and trading logic, and first understand the most important things.
First, solidify the foundation for survival in the stock market, then seek improvement, then seek change.
Learn to unravel the essence, instead of making a mess bigger and bigger, but not finding a real fulcrum.
The great way is simple, and that's how it comes.