Reckless trading is a major cause of losses and bad habits, as well as a major cause of bad trading habits. Reckless trading is mainly characterized by the randomness of trading, temporary impulsivity, cloudiness and frequency of trading in any case. It differs from professional trading in nature, so it will be much more likely to cause losses than professional trading.
Simply put, it is a trade with no value, a risk-profit disproportionate trade, a trade that wants to seize the opportunity, a trade that does not miss any opportunity, a trade that is made as long as the price fluctuates. It does not evaluate how much profit the transaction may bring him and the corresponding risks he takes, always with a lucky mentality, thinking that a few points will be enough, he sees only the profit and ignores the potential risk.
Or at any time it feels that a big opportunity is in sight, not to do it will miss the opportunity. It is always driven by the profit trap to magnify a small opportunity in its mind into a huge opportunity, regardless of whether the current volatility is in line with its trading habits.
The market is not always in a state of transactional value.
Simply put, it is a trade that can afford a set stop loss. If the trade doesn't even allow for its own stop loss, then it is a worthless trade. The market is in a state of complete turbulence or small volatility most of the time, which means that in most cases the market does not have a good trading opportunity.
In such a state, any trade is at most a profit-loss, and even more so the human weakness that the trade is destined to be lost in most cases. In the absence of a trade value in the market, many people cause a considerable loss to the account due to a meaningless trade, which in turn leads to the destruction of the trading mentality and makes him unwilling to trade when the real trading opportunity arises, because of the shadow of the loss of the previous period of trade.
And because he has developed the habit of trading frequently, even if he has a great entry point, he will quickly leave and miss out on a real profit opportunity. Useless trading not only makes you lose slowly when you close, but also makes you unable to hold a position in a trend. Useless trading's bad trading habits make it impossible for him to always make a real profit.
A foolish transaction is also a speculative transaction, which seems to be no different from others, but it is not true. A foolish investor does not really understand what speculation is. What is speculation?
A meaningless transaction is the sight of any object firing a shot, whether it is a prey or not, it is more like playing a game. The pleasure of the game comes from the game process and not necessarily the result. A meaningless transaction is essentially not in speculation, but in a game of futures with money, a purely money-consuming behavior that is contrary to his goal of profit.
Is he not aware of the purpose of his trades? I think the fundamental reason is: the strong desire for profit makes him trade frequently, makes him trade at all costs, that is, the trap of profit makes him trade meaninglessly. The biggest trap in the market is profit, which is the expected profit that makes one lose objectivity and rationality and makes one ignore the existence of risk.
The key to the problem is that we often fail to judge a trade opportunity.
It is true that judgments about trading opportunities and the size of the market are uncertain, but it is precisely this uncertainty that leads to the inevitability of the existence of risk, i.e. the risk of any one transaction is inevitable, but the profit is uncertain. This should all the more attract the investor's attention to the risk first, rather than the profit.
Reducing meaningless trades does not mean that you do not normally trade, it does not mean that as long as you reduce meaningless trades, you will inevitably be able to seize valuable opportunities. Proper trading is an important means of staying connected to the market, the key is that you must carefully consider each trade, be completely clear about where to stop after entering, and whether the market currently has a good entry point, etc. Some markets you can see, but it is difficult to really grasp, we can only do those that can be seen and grasped, such markets are not many in a year, this has been proven for many years.
You have a master brother who, at one time, was in a great state of confusion and confusion, even desperation, and lost only a little money left, and only enough to open a few hands. So he looked at the last trade opportunity very seriously, cautiously and cautiously, unusually cautiously, as he described, checking the chart repeatedly, glancing at the account status, silently counting when the last bullet was fired?
So I thought again, if we treat every trade as the last bullet in our account balance, every opportunity as the last turnaround in our trading career, would we be more careful, would we take each trade more seriously, and would we significantly reduce the number of unnecessary trades?
To conclude, Charlie Munger said that if you are allowed to make 20 holes on paper, each time you make it means you lose a trade, and after 20 chances, your opportunity is gone.
Translated from the Zen Library