After being in the trading business for a long time, apart from studying trading techniques, I have also read a great many books on philosophy. The reason is to gain a deeper understanding of the essence of trading, so as to go with the flow and get a share of the market's profits.

I have found that the majority of people cannot make a profit in trading because of an inherent "greed": they only want to gain and do not want to lose. Once they have gained, they want more; once they have lost, they want to recover.

However, everyone overlooks a reality: most things in this world are obtained by giving up something in exchange for something else.

For example, we trade our time and energy through work to earn money; we invest our capital, take on certain risks, and in return, we get a certain return on investment; we give love and care to others and receive corresponding emotions, and so on.

Nothing in this world comes out of thin air; everything is obtained through some explicit or implicit conditions.

Therefore, you have to give up something to get something, which is also what I often say in trading as the "art of letting go."

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Studying the philosophy of trading is to solve practical problems, not to engage in empty talk. Today, I will combine the "art of letting go" in trading with seven specific issues and provide solutions. If these issues are also your concerns, then after reading this article, your problems will be easily resolved.

1. The art of letting go between different markets

People often ask me like this: "Recently, the futures market is not good, but I see that the Bitcoin market is booming, and I want to give it a try. What suggestions does the teacher have?"

I would advise: Do not go.Let's review the recent market trends together. Over the past two months, Bitcoin has plummeted from $67,000 to as low as $35,000, while U.S. crude oil has surged from $66 to $94. After entering 2022, the NASDAQ index once dropped from 36,952 to 33,150.

The fluctuations in different markets have been enormous, and the financial market is never short of opportunities for profit, with temptations everywhere. In fact, the most sophisticated hunters are like leopards, lurking low-key and waiting for opportunities, rather than like rabbits that jump around looking for food, eventually becoming prey for others.

There are significant differences between markets, making it difficult to excel in all at the same time.

First: The timing is not unified. For instance, Bitcoin operates 24/7, crude oil is available 24 hours a day, 5 days a week, and the NASDAQ has specific trading hours, requiring one to be vigilant 24/7 to seize all opportunities.

Second: Trading rules are not uniform. Different markets have varying leverage, different point value calculation methods, and even completely different trading software, with indicators also varying. Cross-market operations can easily lead to mistakes.

Third: Market trends and their influencing fundamental news differ. It's akin to curling, skiing, and ice hockey at the Winter Olympics—no single person can win gold medals in many events simultaneously, not even Eileen Gu.

Mastering the patterns of a single market is already challenging, and understanding one market thoroughly is more than enough to make us wealthy.

Advice for everyone:

Choose the financial market you are most familiar with and abandon others, even if they seem very tempting. Do not easily get involved. Focus your energy on thoroughly understanding one market.

Forex: The most flexible trading rules, the highest leverage, which can lead to high profits, but high leverage also comes with high risk. Poor operation can result in significant losses, making it suitable for those with a higher risk appetite.Stocks: The rules for domestic stock trading are relatively rigid, and many trading methods cannot be used. It is more suitable for low-risk long-term trading and is suitable for people with a medium to low risk preference.

Futures: The rules are more flexible than stocks but not as flexible as foreign exchange. There are restrictions on trading hours, and the leverage is higher than stocks but lower than foreign exchange. It is also suitable for people with a higher risk preference.

2. The willingness to let go between different varieties

Take foreign exchange as an example, MT4 has hundreds of varieties, and these varieties have different ups and downs, and the times when the market starts are different, which is dazzling to watch.

"The recent crude oil space is really big, hurry up and do some crude oil."

"The gold has been in a standard pattern recently, do some gold."

"Russia and Ukraine are in conflict, we must hurry up and short the ruble."

One wishes to have 10 hands to trade all the varieties, not willing to let go of any opportunity. Doing so will only lead to the following two situations:

Situation One:

Different varieties have their own operating characteristics. For example, crude oil has a large market at night, the Hang Seng Index opens with severe fluctuations, and there is a lot of washing. The result of constantly switching between varieties is that one is not familiar with any of them and cannot do well in any.Situation Two:

Too many varieties to handle. Especially for short-term or intraday trading, selecting varieties, opening positions, closing positions, adjusting positions, adjusting stop losses, and setting profit targets involve so many steps. When dealing with two or three varieties that need to be traded simultaneously, it's easy to get confused, and confusion leads to mistakes.

Trading is not a game where you can start over after making a mistake. Any wrong move can result in the loss of our hard-earned money.

My advice to everyone:

I have written about the characteristics of each variety and what kind of personality is suitable for what type of variety in my public account (Eight-Digit Garden). I suggest that everyone should understand the features of each variety before making a choice.

For hourly trades, do not operate more than 4-5 varieties at the same time (crude oil, gold, plus two or three major currency pairs).

For intraday or short-term trades, do not operate more than 2-3 varieties at the same time (choose those with significant intraday fluctuations, such as: gold, crude oil, GBP/JPY, these three varieties are optional).

Keep a close eye on the varieties we should trade. If a variety is not ours, it doesn't matter if its price soars to the sky. Do not be envious. Because our variety will also have its moment to soar, and capturing that is more important. This is the necessary art of letting go.

3. The art of letting go between profit and loss

Many people have heard the term "profit and loss come from the same source," which is the most basic trading concept but also a trading threshold that many people cannot get past.The manifestations of mistakes are mainly twofold:

(1) Only enjoy profits and do not accept losses.

After each loss, one feels extremely painful and cannot bring oneself to cut losses, hoping for the market to turn around, and sometimes even adding positions against the trend, ultimately leading to severe losses.

Or if one day's account shows a loss, one keeps trading, silently thinking that they will stop once they have made up for the losses, but end up losing more and more.

(2) Only see profits and fail to see losses.

Many people, after a period of trading, will automatically overlook the moments when they have lost money, only remembering their high-profit moments. Because human nature tends to seek benefits and avoid harm, most people will automatically avoid things that make them feel uncomfortable.

Therefore, many people feel that they are always making profits, which is why they become addicted to trading. The moments of profit are just too joyful, and only upon checking their account do they realize that they have actually lost more.

As I have said many times, the essence of trading is a game of probability. Your role should be that of a chess player, not a chess piece. You need to view the game from a holistic perspective.

If you lose one piece but gain two, lose four but gain six, and ultimately end up losing twenty pieces while winning thirty, then during the times when you lose pieces in the game, you might not care as much. At this point, you possess a strategic view, understanding that losses are for the sake of better gains. This is achieving a balance between profit and loss.

Advice for everyone:(1) Keep a long-term perspective on profitability, and do not dwell on the right or wrong of individual transactions. When it's time to cut losses, do so strictly, and aim for overall profits to exceed overall losses.

(2) It is necessary to establish your own trading rules or a trading system. By optimizing the profitability of the trading system, you can achieve ultimate profits.

4. The art of letting go between different market conditions

Market conditions are always switching between consolidation and trend phases. However, it is impossible for trading to make money in both consolidation and trend conditions simultaneously; one must be sacrificed.

There are two reasons for this:

(1) Different types of indicators form different types of trading systems, which are designed to handle different market conditions. This is a limitation of technical indicators and trading systems.

For example, when the MACD is overbought, the market can correct the overbought condition with a short-term pullback, and such an indicator is only suitable for trading during consolidation phases, as it cannot hold onto trends.

As you can see in the chart below, when you insert indicators on the MT4 platform, there is a clear classification: "Trend indicators and consolidation indicators."

(2) The mindset for trend trading and consolidation trading is different.

Consolidation trading requires closing positions quickly to secure profits, while trend trading aims to hold positions for as long as possible to let profits run.Unable to distinguish between trading range-bound or trend-following, once the order is placed, we start an internal debate: should we hold or close the position? Without a unified trading standard, there can be no execution power, and trading is bound to result in losses.

My advice to everyone: choose between range-bound and trend-following.

Range-bound trading involves shorter holding periods, with profits accumulating over time. Trend-following trades have longer holding periods, with better profit-to-loss ratios. Both have their merits, and everyone should choose based on their personality traits.

There is also a third option: swing trading. This is suitable for wide-range volatility. This trading model strikes a balance between range-bound and trend-following, with more balanced success rates and profit-to-loss ratios, making it easier to execute.

The trading system I shared in the previous course is also designed for wide-range volatility.

5. The art of choosing between different time frames.

Why make choices between time frames? For two reasons.

Firstly: to determine the direction, one must first determine the time frame.

The most difficult question in trading is: what is the market outlook? Should we go long or short?

In the basic definition of trends, they are divided into long-term trends, medium-term trends, and short-term trends. In different time frames, the direction of long and short positions varies.Being in a 4-hour moving average death cross indicates a bearish trend, while being in a 15-minute golden cross indicates a bullish trend.

At this juncture, one must either abandon the 4-hour timeframe and go long on the 15-minute chart, or abandon the 15-minute timeframe and go short on the 4-hour chart; one must choose one of the two options, otherwise, there will be a conflict between long and short positions, making it impossible to operate.

Secondly: Selecting a time frame that suits oneself is essential for successful trading.

Many traders are part-time, needing to prioritize their job before trading, with work being the main focus. In such cases, it is necessary to forgo short-term and intraday trading on small time frames, and choose a trading cycle and frequency that suits one's work intensity and time.

Advice for everyone:

For part-time trading, select a time frame of one hour or more for trading. For intraday trading, select a time frame of five minutes or more for trading.

It is not recommended to engage in trading on a one-minute time frame, as the high trading frequency demands a lot from the trader's reaction speed, psychological quality, and trading system settings, which are challenging for non-professional traders to manage well.

6. The art of letting go between different indicators

Many people, when they first start trading, will constantly switch indicators. Some may also believe in the myth of indicators, thinking that there must be a magical indicator or a combination of indicators that can make a fortune.

This kind of thinking is actually quite normal. When I first started trading, I was also like this, going in circles with magical indicators and magical trading systems, always thinking that my lack of profit must be because I haven't found the right one, rather than because it doesn't exist.For instance, if the Bollinger Bands' middle band performs well one day, then switch to the middle band the next day; if the 90-day moving average performs even better this week, then switch to the 90-day moving average for the next week.

However, the market seemed to be watching me closely; as soon as I changed the indicator, the trend would change, and no matter what I did, I ended up with losses. Over two years, I changed indicators dozens of times and lost millions. It was only later that I learned this is what "The Turtle Trading Rules" refers to as recency bias.

Later, through backtesting, I realized that many indicators, when combined into a trading system, can be profitable. These trading strategies are not limited to any specific indicator. It's just that these trading systems have periods of decay and profitability, and many people exit trades during the decay period, leading them to believe that the indicator doesn't work.

So, in reality, it's not that the indicators are ineffective; it's that we lack the sufficient patience and perseverance to endure the decay period of the trading system and welcome the period of profitability.

Advice for everyone:

(1) There is no such thing as a magical indicator or trading system in this world, and indicators cannot predict market trends. The sole purpose of indicators is to provide a standard for trading.

(2) No matter how many indicators you learn, you need to make some choices and keep 3-5 that you are most familiar with and use most comfortably. With fewer indicators, the standards you set will be clearer and more explicit, and the direction will be more evident, which will help you to make a profit.

Trade-offs between Profit-to-Loss Ratio and Success Rate

In trading, it is common to encounter situations like this:

After closing a position, a 10-fold major trend emerges, and you only made a small profit, regretfully slapping your thigh.However, when you increase the risk-reward ratio, you may find that orders are consistently stopped out, resulting in a very low success rate, which can be quite demoralizing.

People often ask me, how can one achieve both a high risk-reward ratio and a high success rate?

In reality, within a trading system, a high risk-reward ratio and a high success rate are inversely correlated; it is impossible to have both at the same time. If you remain fixated on the mindset of pursuing both, then trading is bound to result in losses.

We should not aim for both, nor should we make a choice between them, but rather seek a balance between the two.

(1) If a trading system has a very low success rate but a large risk-reward ratio, there will be a high number of stopped-out orders, and the account's drawdown from losses will be severe. At this point, the psychological pressure on the trader is too great, leading to issues with execution. When execution is problematic, losses follow suit.

(2) If a trading system has a high success rate but a small risk-reward ratio, many profitable trades may not be enough to cover a single losing trade. This can make traders increasingly cautious, shrinking their risk appetite, and similarly causing issues with execution.

Therefore, focusing solely on one aspect will lead to problems with the execution of the trading system.

My advice to everyone:

I will directly provide you with reference values for balancing the risk-reward ratio and success rate.

A trading system with a success rate of over 40% and a risk-reward ratio of 2:1 is considered to be well-balanced.A trading system with a success rate of over 30% and a profit-to-loss ratio of 3:1 is considered to be well-balanced.

The above is the practical manifestation of the trading philosophy of "letting go" in actual combat. By comparing your own trading and trading system, identifying issues, and making some adjustments, you can better achieve profits.