Many people ask me whether talent is needed to trade. Some individuals feel that they have a low level of education or are new to trading, and they believe that those who do well in trading are all gifted with extraordinary intelligence.

I'll give you a direct answer: Trading does not rely on talent; one can succeed through hard work and effort.

Friends who know me well are aware of my "tragic history." I used to lose so much that I was left with nothing, and my love life failed, making me feel like a loser in life.

But when one truly hits rock bottom, you become clear-headed. You detach from the restless trading market and start to learn and think about many things.

At that time, I read a lot of books, learned a lot of trading techniques, reviewed hundreds of years of trading systems, tested all the parameters, including different varieties, cycles, and settings of the trading system, and then did two years of simulated trading before I truly established my current trading system, trading cognition, and my trading beliefs, achieving profitability in trading, which has brought me to where I am today.

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Such an experience has nothing to do with talent. I am not particularly intelligent by nature. If you can do the same things I did, you can also achieve profitability in trading; it's just that few people can truly do it.

Without experience, one does not have the right to speak. So today, let's talk about the 8 preparations I believe are necessary for trading profitability, which I believe will be very helpful to everyone.

1. Conduct an in-depth self-analysis

Before engaging in trading, it is necessary to conduct an in-depth self-analysis.

Are you prone to gambling?Can you calm down and learn?

If you are about to start trading tomorrow, lie in bed at night and ask yourself: What do you want to achieve through trading? Are you preparing to make 300,000 with just 500? Or do you want to earn some money through trading to supplement your life?

I have a friend who participated in online gambling. At first, he was very lucky and made 300,000 with just 500. What is his current life situation? His parents sold all their assets to help him pay off more than 3 million, and this year is the 6th year of him paying off his debts, with still more than a million left. Now in his 40s, he is alone and has nothing.

So if you are thinking of making a big profit with a small amount of money, that mindset is no different from a gambler's. In the financial market, your human nature will be infinitely magnified, to the point of being uncontrollable. If you are usually a person with a strong gambling nature, you might consider giving up on trading and returning to a normal life.

If your idea is to use the spare money you have on hand to earn some reasonable returns to improve your quality of life, then trading might be a good choice for you.

After judging your own gambling nature, ask yourself again, if you have to learn something very boringly, can you persist?

Trading is actually like many things in this world. Many people who start at the same point as you are better than you and live better lives, just because they work hard and are willing to put in the effort to learn, enduring the hardships that you can't bear.

The financial market is even more brutal than the real world; it cannot tolerate those who only follow the trend, do not think, do not take the initiative to learn, and let their desires run wild.

Trading skills are a kind of knowledge, and trading execution is a kind of ability. Knowledge and ability must be learned and trained to achieve mutual cooperation and move towards profitability.

Therefore, new traders need to learn completely new knowledge, and even establish a completely new knowledge system. Many people start trading with great ambition because they are fresh to trading. As learning deepens and the difficulty of knowledge increases, learning becomes boring and even difficult, which is a great challenge for traders.If you are a lazy person who is unwilling to learn, enjoys reaping without sowing, then it is best not to engage in trading.

After conducting an in-depth self-analysis, proceed to the next stage.

2. Determine which market is more suitable for oneself.

The most common markets currently are three: stocks, futures, and forex.

These three markets have different rules. The trading flexibility, ranked from low to high, is as follows: stocks < futures < forex.

Stocks: One-way trading (only long positions), T+1 settlement, minimum trade of 1 lot (100 shares), intraday break between morning and afternoon trading sessions.

Futures: Two-way trading (long and short positions), T+0 settlement, minimum trade of 1 lot, intraday break in morning, afternoon, and night trading sessions, leverage of 10 times.

Forex: Two-way trading (long and short positions), T+0 settlement, minimum trade of 0.01 lot, 5 days × 24 hours trading, no intraday break or opening, leverage options from 100 to 400 times.

As a full-time trader who values technical analysis, I place greater emphasis on the fairness of market rules. Forex allows for both long and short positions, has no T+1 settlement restrictions, no break or opening restrictions like futures, smooth trading, and the market is relatively more fair. Due to the higher leverage, there are also greater challenges in trading techniques, which suits my personality.

If you are just starting out in trading, you can choose a market that suits you based on the rules of these trading markets.I primarily deal with foreign exchange and futures, so the following explanations will focus on these areas.

3. Possessing the Correct Trading Perception

In fact, many people have been unable to make profits because they started off on the wrong foot. There are many untested claims circulating in the market, such as:

Doubling in half a month, tripling in three months, trading should be done this way, otherwise what's the point?

There are trading methods that yield continuous huge profits, there are trading gods, you just haven't found them yet;

Trading is all about aiming for a full account turnover, it's best to go all-in with a single bet, gamble it all, turn a bicycle into a motorcycle, and so on.

Human nature is greedy, seeing these people flaunting their trading results, having multiplied their investments several or even dozens of times, one can't help but feel envious, thinking that although these people may be exaggerating, they might be telling the truth.

What happens then? The gambling instinct is ignited, and they are harvested like leeks in various ways.

So many people have actually got their priorities wrong, first coming into contact with incorrect perceptions and treating these erroneous beliefs as their trading faith, which is why they perform worse and worse. Or some people think that perception is not important, and that it's enough to just learn the skills, which is also a very fatal mistake.

Let's discuss the three most important perceptions I believe are crucial in trading:(1) A Reasonable Return Expectation is Essential

Trading is not a game of chance, nor is it buying lottery tickets. Do not harbor the illusion of getting rich overnight by catching a big market trend and reaching the pinnacle of life. Such an approach is not much different from gambling, and the most likely outcome is a severe loss, leaving you bewildered.

Just as a wooden barrel with a short plank will continue to leak, patching the other planks is useless; you must repair that short plank first, addressing the leakage issue before tackling the water retention problem.

Our primary goal in trading is to survive in the market, to avoid the risk of substantial losses, and then consider how to improve profits.

Therefore, having a reasonable return expectation can help you curb the mentality of big wins and losses, allowing you to progress steadily.

Currently, my personal return expectation is an annualized 40-60% in foreign exchange, which is also the average of my profits over the years. If spread out over a month, it would be 3-5%, which can serve as a reference for everyone.

(2) Have a Holistic View of Trading

Trading profits require a time horizon, and we should at least calculate our profit levels on an annual basis. Many people often ask me to look at their profits over a few days or months to judge a person's trading skills, which is not objective.

Sometimes jokingly, I think trading should learn to "detach from the soul." When you step away from the current trade, from yourself and the trading market, you can view the entire trade from a third-party perspective.

Trading is like a game of chess you play; you might lose a piece or temporarily fall behind, but you always know your ultimate goal is to make a profit, and every move you make now serves the final outcome. You won't be too concerned, temporarily retreating to advance.So there is give and take, surplus and deficit. By controlling the losses and optimizing the profits, the ultimate outcome is the victory of probability.

I don't know how many people can understand these words, but those who do will surely end up in profit.

(3) Maintain a distance from the market

Many people enjoy checking their trades from time to time, almost wishing to be immersed in it all day long.

There are also many who trade like a startled bird, with every market fluctuation causing great emotional swings, becoming furiously sad when they lose and ecstatically happy when they profit.

When a trade goes wrong or is missed, it's extremely painful and self-blaming, wondering why they didn't sell then, or why they didn't buy then; when a trade is right, they can't wait to tell the whole world about their earnings.

The market is infinitely stimulating your human nature, amplifying your emotions, making you experience extreme joy and sorrow in this crazy stimulation every day, leading to wrong decisions.

At this time, those who maintain a stable and rational mindset, those with a "big picture view," are just like giving you a "checkmate" on the chessboard, perfectly harvesting.

Since trading is a game of human nature, and human nature is inevitable, the only method is to maintain a certain distance from the market. Do not touch, do not inquire, do not be curious, just do what you should do, and maintain a stable mindset.

The outcome of the trade will surprise you.4. Essential Knowledge for Trading

(1) Trading Technical Knowledge

For instance, knowledge of candlestick charts, the use of technical indicators, and technical theories (such as Dow Theory) are all essential for trading. I have been recommending two books that have not paid me, but they are indeed well-thumbed volumes. One is "Japanese Candlestick Charting Techniques," and the other is "Technical Analysis of the Financial Markets." These are the most fundamental and comprehensive books for learning technical analysis knowledge.

Many people feel overwhelmed by the vast amount of technical knowledge in trading, but in reality, mastering the technical knowledge in these two books is sufficient for conducting technical analysis trading.

(2) Knowledge of Trading Instruments

A: For example, in futures, the interconnectivity of the black series, the gap issue related to the linkage between fuel oil and crude oil with the external market, knowledge about futures contract rollovers, and the calculation of price changes and point values for different futures instruments, such as 1 lot of rebar contract being 10 tons, while 1 lot of live pig contract is 16 tons.

B: For instance, in forex, the interconnectivity between non-US currencies and the US Dollar Index, the impact of important data on the trend of certain instruments, like last week's US CPI data that pushed up the US Dollar Index and simultaneously caused a significant increase in market risk aversion, driving up the price of gold, which is a very representative example. Also, the calculation of point values for forex instruments, all of these need to be well understood.

(3) Knowledge of Trading Rules

Calculations of leverage and margin in the futures market, rules for price limits, and rules for trading hours, etc.The calculation method of the blowout rate in the foreign exchange market, the margin ratio with different leverages, the calculation method of overnight interest, etc.

(4) Knowledge of trading psychology

Trading psychology must accompany trading technology; both are essential. After all, financial markets are all about human nature. I recommend a few books on trading psychology that have been particularly helpful to me.

5. Proficiency in using trading tools

After you have learned the essential knowledge for trading, you will definitely start trading. However, there are quite a few pitfalls when trading forex and futures domestically, especially in terms of software usage and platform selection.

Many traders I have encountered do not perform poorly in trading; they are often taken advantage of by others through excessive fees or unfamiliarity with software operations, leading to frequent misoperations and unnecessary losses, which is quite regrettable.

I will also produce some tutorials on software usage in the future, so please continue to pay attention.

The basic selection and use of trading tools:

(1) Forex trading software

Forex trading is conducted using MT4/MT5, which is available for both computer and mobile versions and can be downloaded from the platform's official website.(If you are unsure which is the official website, or if you are afraid of downloading virus software, you can directly ask me for the download link in WeChat)

(2) Futures Trading Software

The main futures trading software includes Wenhua Financial, Boyi Master, and Fast Futures. All of them have both mobile and desktop versions. You can download them directly from the official website of Wenhua Financial or the official websites of various futures companies. There are not many counterfeit futures trading software, so you can download them by yourselves.

(3) Forex Platforms and Futures Companies

When choosing a forex platform, the main considerations are: the cost of trading (whether the spread is high, whether there are any fees), the safety of funds, the speed of depositing and withdrawing money, and the trading environment (such as the frequency of lag, disconnection, and slippage).

For futures companies, the main consideration is the level of transaction fees. The lowest fee standard that ordinary retail investors can obtain is the "exchange fee". On the basis of low fees, it is better to choose a futures company with a higher ranking.

Due to space limitations, I will not elaborate on the details. If you have any further questions, you can ask me privately.

(4) Review Tools

The review software for forex is: Review Master. (There is also review software in the bottom left corner of my public account, and those who are interested can compare and use it)

For futures review software, you can search for: Pan Cube.(5) Tools for Simulated Trading

Engaging in simulated trading using these tools is identical to real trading, allowing you to intuitively experience market fluctuations and gauge your own trading skills. This is extremely important for new traders.

For forex trading, you can directly register for a demo account on MT4/MT5 and start trading.

For futures, you can also register for a demo account on Wenhua Financial to conduct simulated trading.

6. Understanding of Trading Systems

Many people know about trading but are not aware of what a trading system is, thinking it might be a high-end thing, a program, but it's not.

Everyone can have their own trading system.

With a trading system, it's like having a traffic controller at a crossroads. There are clear rules for every trade, including opening and closing positions, and managing positions. You won't rely on feelings for buying and selling, and when encountering trading issues, you won't be confused about how to resolve them.

A basic trading system consists of four parts:

(1) Confirming the Direction(2) Selection of entry positions

(3) Setting of stop-loss and take-profit levels

(4) Rules for money management

In fact, a trading system is quite simple; it involves establishing rules for these four aspects of trading, which provides a consistent standard for your trading activities. Once you have clear standards for all four parts, firstly, your trading will not be chaotic. Secondly, you can quantify the results of all standard trades, allowing you to process and analyze this data. This enables you to understand how to optimize your approach to achieve a trading system that is suitable for you and capable of generating profits.

When you possess a profitable trading system, you will have strong confidence in your trading operations, and may even develop a belief in it. On the execution level, it will be relatively much easier.

You will no longer trade based on feelings, opening positions at random with market fluctuations, often making small profits and incurring large losses, lacking trading discipline, and ultimately suffering significant trading losses.