How to Understand Short-term Trading

2023년 2월 28일

To begin with, let's dampen the spirits of short-term enthusiasts who are new to the market. The success rate of purely candlestick chart technical analysis or chasing the leading stocks based on a simple "follow the trend" strategy is around 45%. This is akin to gambling at a casino in Macau and is likely to erode your capital.

Short-term trading is a comprehensive skill. Many people have spent a lot of time studying technical analysis, policy aspects, and fundamentals, but have failed to achieve success. Success comes with diligence, but it is also essential to know how to use a combination of approaches.

Those who are skilled at short-term trading should understand their own characteristics and find methods that suit them best.

When the timing is not ripe or the market is unfavorable, it is essential to face the risk rationally. When opportunities arise, go all out to seize them. Although this sentence is easy to understand, it is not easy to achieve. Many people tend to be eager to recover their losses when they lose money, repeatedly resisting risks and becoming numb to the stocks they are deeply trapped in when opportunities arise.

When the market's development and one's own judgment are inconsistent, it is necessary to re-examine the situation. The more critical the moment, the more crucial it is to handle it calmly. A stable mentality is the basis of short-term trading.

Short-term trading requires strong comprehensive qualities, including a calm and rational mentality, a good overall perspective, a sound trading system, and belief.

The position size of a skilled short-term trader is usually positively correlated with the overall trading volume of the market. When opportunities abound, trade frequently, and when opportunities are scarce, trade less.

Technical chart patterns are relatively secondary. The key is to grasp market sentiment, which is difficult to quantify without charts but can be deduced by intuition.

Apart from transaction volume, almost no other indicators are considered. Transaction volume is mainly used to observe changes in trading volume and combine them with price changes to deduce the changes in the sentiments of insiders and outsiders.

Specific technical details are not particularly important to individuals. Once you understand the general direction, there is no need to belabor the point. To put it in my own words, although short-term trading is being done, we are looking at a bigger picture.