Investment novices face a long and arduous journey from entering the market to achieving stable profits. During this process, traders need to continuously try and explore, learn and summarize to find their own way of trading. However, some smart traders stand on the shoulders of giants, gaining experience and lessons from the practical accumulation of their predecessors: following the correct trading steps can make trading more efficient!

Experienced traders follow five basic steps to improve the success rate of their trades: first, select quality trading instruments; second, manage capital; third, choose the right timing to enter; fourth, hold firmly; and fifth, choose the right timing to exit. For all single transactions, completing these five steps also constructs the process of formulating a single transaction strategy.

1. Select Quality Trading Instruments

A good trading instrument is one with active capital liquidity and a relatively low risk coefficient. Of course, according to the different personalities and preferences of traders, everyone will have different criteria, but good instruments usually have two characteristics:

First, the fluctuation of a single K-line is small, but the fluctuation of multiple K-lines combined is large (or can be understood as a smooth and trending instrument). If the trial is wrong, it is possible to stop loss in the short term, and the stop loss range is small; if done correctly, the profit space is large, and the drawdown is also small, which meets the basic requirements of profit and loss ratio operations.

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Second, choose instruments that rarely have sudden gaps or have gaps but with small amplitude, because gaps are force majeure. In the face of gaps, the stop loss position is invalid, and everything is based on the gap price. Therefore, instruments with large or extreme fluctuations have immeasurable dangers. Coupled with the leverage effect, it undoubtedly amplifies the risk level. It is best to stay away from such instruments.

2. Manage Capital WellIn the financial market, the real winners are masters of fund management. Before engaging in trading, traders need to formulate a clear fund management plan. Although market analysis is important, it only stays at the level of technique, while fund management is a strategic requirement and must be more important. Only by managing the account funds well is the key to trading.

When mistakes occur, the smaller the loss, the easier it is for traders to recover from the loss, and they will not be eliminated by the market in a short time. This is the fundamental and consistent principle that traders must adhere to for survival.

3. Patiently wait for entry and exit signals

After selecting the trading variety, formulating the trading position, and management plan, what traders need to do is to patiently wait for the system to issue entry signals. No matter which level of trading is chosen, if it does not meet the standard of the system pattern, they must resolutely take no action, that is, there may be signals but not necessarily do it, and there must be no action without signals.

Moreover, there should be no opportunity to create opportunities for oneself. Trading must be reduced, using the system to help traders filter out some unnecessary signals to avoid wrong decisions caused by the traders' subjective behavior or emotionalization. Because the system can best reflect the actual situation of the market, while traders are more likely to confuse the desired results with the actual truth.

What traders need to do is to obey the trading system, patiently wait for the entry opportunities that meet their own system conditions, and believe that such opportunities will definitely appear. Objective facts will determine subjective understanding, and never be a fool who thinks he is very smart.

4. Hold on to profitable positions

Traders need to remember that the purpose of opening a position is to hold it. When the trend is favorable to the position, traders should maintain a calm attitude, hold on to the profitable position, and not easily move it. As long as it meets the system requirements and is always beneficial to themselves, they should continue to hold the position for as long as possible. They should persist in letting the system tell you when the market conditions are no longer favorable to you, and then the moving stop loss will help you leave safely.

In short, the confidence in holding a position comes from the trader's full trust in their own system.

5. Fixed stop loss to reduce riskIn trading, entering a position is relatively easy; exiting is the true challenge.

Once a position is entered, profits and losses are generated, and the trader's emotions are more susceptible to the influence and test of market fluctuations. Because traders fear that victories may turn into defeats, this mindset of wanting to win but fearing to lose is the fundamental reason for not being able to hold positions. They hastily close positions when there is a slight floating profit, and on losing positions, they more obviously hope to turn defeat into victory. This subjective expectation behavior is most likely to lead to holding positions, allowing losses to continue.

Practice has shown that moving stop-loss is a passive way to exit. Using a trailing stop-loss method is often more effective. Although it cannot exit at the highest or lowest point of the price, traders can usually capture most of the middle segment of a major trend. In addition, the main methods of exiting include fixed stop-loss, time stop-loss, and actively exiting in batches when reaching the target position, among other operational techniques.

Summary

Overall, the difficulty of trading lies in the fact that there are too many random and uncertain factors. The core concept of trading is to use various technical means to deal with and respond to various uncertainties, which is also the purpose and function of investors to formulate trading strategies.

By following the above five basic steps, a most basic and simple trading strategy is formed, that is, to clarify the type of operation, adhere to system conditions, be clear about the profit space you want to capture, do not expect to eat both big and small, give up predictions and expectations, focus on handling risks, set goals, and insist on the bottom line of stop-loss.