This article focuses on how “blindly entering into trades” reflects the impact of retail traders’ mentality towards price fluctuations in the financial market. It delves into how to overcome blind trading with systematic trading strategies. This blind way of entering the market, which may be attributed to overconfidence or a lack of thorough consideration rather than being based on rational analysis, can lead investors to make impulsive decisions when the market fluctuates rather than being based on cautious and well-informed judgments.
Critical Thinking on Blind Entry.
When market conditions fluctuate, retail traders usually choose to enter at support or resistance levels. However, this is often a time of blind entry. The so-called “blind entry” refers to trading without any confirmation signals, that is, lacking clear market guidance. Generally, it is recommended to carefully consider before trading and confirm entry signals through methods such as candlestick patterns to avoid falling into a blind entry strategy similar to that of most people.
For example, when a certain market has been in a downward trend, continuously falling for several months with a drop of more than 1,500 points. If one chooses to short without any confirmation signals (such as Pin bar, Engulfing bar, Inside bar candlestick patterns), this belongs to blind entry trading.
Whether it’s professional traders from banks, hedge funds or investment companies, they usually don’t stand by idly and wait for a certain variety to continuously decline for several months until a clear trading signal appears before entering to short. For them, “blind entry” is not absolutely advisable. But we need to think about why this approach is considered inadvisable, as well as the logic and definition behind it.
If the market trend is already obvious, but you still insist on waiting for a certain specific trading signal or candlestick pattern to confirm the entry point, it may mean that you have not truly understood the essence of market operation. Relying on a single candlestick pattern signal to confirm the entry point may be an overly simplistic method and fails to deeply understand the complexity of price movement. Understanding the internal mechanism and trend of the market is crucial for formulating more effective trading strategies.
Presumably, like most traders, you always wait for the candlestick pattern signal to appear before entering a trade? But by then, it may have risen (fallen) by several thousand points. You have missed the best entry timing and point and lost a large amount of profit in vain. When you really wait until the “K-line signal” appears, it may be too late.
You may have read and heard many people’s views on trading entry, and may have also heard different viewpoints. These viewpoints are all considered from different angles. Therefore, it is recommended that you think about trading from multiple angles. In that way, you will have a deeper understanding of trading. As time goes by, you will increasingly see the essence of the market.
Overcome blind trading with systematic trading strategies.
According to institutional surveys, there are currently about 100 million investors in gold, currency, and other fields in China. However, the vast majority of these investors often decide to buy or sell on a whim, and eventually become waves of “leeks”. Therefore, if there is a systematic and verified trading strategy, the vast majority of investors can avoid the fate of being “leeks”.
Whether it is short-term trading or swing trading, a systematic trading strategy is very important. And a trading strategy must meet two requirements: Describability and Measurability of Results. After formulating a trading strategy, coherence and consistency must be maintained in the implementation process.
Measurability of results is very easy to understand. As the name suggests, when I trade with this trading strategy, the ratio of profitable and loss-making trades, the maximum drawdown range, profits, etc. within a certain period must be able to be statistically calculated. If there is still a large amount of floating profits and losses after the end of our investment cycle (for example, one year), then this strategy violates the second point.
In the process of implementing the strategy, the most important thing is to maintain the coherence of the trading system. Because only a coherent trading strategy can accurately present its effects and provide us with methods for improvement. If we focus on one trading strategy today and another trading strategy tomorrow, it will be difficult to accurately calculate the results of the trading strategy.
Still taking the coin-flipping strategy as an example, if we go long when it lands heads up and after a month of practice we find that the accuracy rate is only 20%. Then at this time, as long as we reverse the strategy and go short when it lands heads up, the accuracy rate at this time may be 80%. On the contrary, if we go long when it lands heads up today and go short when it lands heads up tomorrow, then we won’t know the accuracy rate of going long when it lands heads up.
Learning is truly like “sharpening the axe will not delay the work of cutting firewood”.
But it is not easy to conduct a systematic and professional learning. In today’s era of information explosion on the Internet, there is an overwhelming amount of materials on various technical analyses and fundamental analyses with numerous names. Trying to find an effective trading method from among them is an extremely challenging task. For novice investors, it is almost impossible to complete it alone.
Even if complete materials are found, an experienced and responsible guide is also very important. Because learning does not mean being able to be used in actual combat. For veterans who have been engaged in actual combat with real money in the market all year round, their interpretations of each classic market situation can make beginners feel as if they were on the scene and unforgettable.
Rather than blindly operating without a clue in the market, it is better to calm down and listen to the teachings of professional investors. Rather than “paying tuition fees” with losses of tens of thousands, hundreds of thousands or even millions in the market, it is better to conduct professional and systematic training at a relatively low cost from the very beginning. Sharpening the axe will not delay the work of cutting firewood. Only by first completing the transformation from a novice to a professional investor can we avoid detours and move towards profitability.
Reproduction Notes：InvestFancy » How to Overcome Blind Trading with Systematic Trading Strategies