To be speculative or defensive? That is a set of superficially agitated choices in trading. Quantitative strategies tend to easily form operational either-or options, from the perspective of which a dialectic is not able to be developed. Aside from quantitative knowledge, what we are discussing may not be choice, but "opportunity management".
Choosing an Opportunity
There are plenty of opportunities in trading, why are some of them so special? Think about the situations in trading have impressed you in the past. Are they the specific results of some trading opportunities, such as missed profitable opportunities, large profit points, continuous losses, etc.? It is not easy to handle all of these scenarios in trading. The difference between blind speculation and selective speculation is whether you can screen the opportunity or not.
Three choices are accepted by the majority, namely non-agricultural market, event market, and extreme market, which can make it easier for the market to run out of a certain range. They all share the same characteristics: the weak influence of the front-end market correlation, the general trend, and the existence of macro laws.
Have you ever seen a snake hunt? Instead of chasing the prey, it spends most of the time ambushing and waiting, with infrared sensors as an indicator. When the time comes, it attacks rapidly. The prey, of course, is swallowed whole.
Waiting with Patience
Stability and sustainability have always been the greatest pursuit of investors. Although there are many large-volume transactions, it is the consensus of the market that the larger the capital is, the more careful one should be. Among defensive traders, there is a saying goes “stop loss comes first”, which is certainly not the whole of trading strategies, but perfectly explained the response to unpredictable market.
The greatest difference between being defensive and being speculative is that the former focuses on rules and conditions. Since the market is unpredictable, it is necessary for situations in the market to be classified, and traders need to spend energy on not only dealing with changes in the market, but also overcoming the implementation bias. So they can choose a richer trading environment, where the bumps cannot easily hurt them.
Have you ever seen a turtle eat? It picks small animals, bites them apart, and then swallows one by one. It is often not interested in fish and shrimp heads that are difficult to digest.
Being the Manager of Opportunity
In the development phase, you have to choose from being defensive or speculative.
Most traders think of themselves as machines, running back and forth between executing and avoiding execution errors, which can be tiring and inefficient. If we can achieve the separation of management and execution (people + people or people +EA), we should regard chasing opportunity and being defensive as independent issues without interference, and try to balance them as a manager. Apply the strategy of chasing opportunity to focus on events, market sentiment and external effects of the market, with the goal of chasing the trend. With a good strategy to firmly implement the rest of the normal market, the pursuit of unbiased, undisturbed effect.
Adopt defensive strategy to firmly implement the rest of the normal market and pursue an unbiased and undisturbed situation.
With the framework of opportunity being set, are you still worried about the choice?
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