Depth! Why can I earn 6 million U? First, understand how to trade, where will you fail?

1. Die without direction,
There are only three market conditions: rising, falling, and oscillating. In small cycles, these three conditions intertwine, while in large cycles, there is only one main direction. The large cycle is the direction you need to participate in, even if it has been in motion for a long time, at the top or bottom, the main direction will not easily turn.

2. Die from entering casually,
The market is a mixture of rationality and emotion, a combination of fundamentals and bubbles. You can make money from rationality or from bubbles. Reflexivity theory tells us that price levels do not reflect value; the market can be far above or below so-called value at times. In other words, the market can be irrational for a long time, behaving illogically. A speeding car can stop in two ways: one is to slow down gradually and then stop, the other is a brake failure, crashing directly into a tree. Unfortunately, in most cases, it is the latter. Insisting on shorting at the top during an uptrend and going long at the bottom during a downtrend is like a mantis trying to stop a car, overestimating one's own strength. You may have your own logic, but the market does not recognize it.

3. Die from inappropriate frequent trading,
Ultra-short-term trading has a kind of magic that makes you always present in pursuit of maximum profit, swinging back and forth between losses and gains. The secretion of dopamine in the brain keeps people enthusiastic. Theoretically, frequent trading can indeed achieve maximum returns, but you are likely unable to grasp this rhythm because there are always others who think differently than you, or you are in a human-machine competition, where ordinary people have a low win rate. Capital continues to wear down, profits are limited, and only in fluctuations can time and profit-loss ratios cover losses. However, fluctuations themselves represent a sluggish trading environment, ultimately leading to trading in wave-like fluctuations, but it is extremely easy to miss one-way trends.

4. Die from untimely timidity and boldness.
Essentially, it's a case of being overly clever; you're either not too smart or overly smart. I can clearly tell everyone that the vast majority of retail investors in the market are fools, including myself (. Among the fools, there are very few who are extremely foolish; they incur the most losses. However, there are also very few top-level smart individuals, and they lose quite a bit as well. On the other hand, those who are not very smart and not very foolish can achieve a break-even point, while those who are second-tier smart can achieve maximum profits. Why? As mentioned earlier, the market is a combination of rationality and emotion. Pure rationality and pure emotion often fall into the contradiction of self-referential argumentation, meaning they become extremely twisted and entangled. Pure rationality continuously seeks evidence to support its own views, resisting until it bursts, while pure emotion tends to chase trends and make impulsive trades, always buying at the peak and selling at the bottom.

Being overly clever is reflected in thinking that since the price is already so low, it should go up. This is akin to catching a falling knife in a downward trend. Trading trends based on the logic of fluctuations, people always want to use small risks to earn large returns, and the results are predictable. This is a small foolishness and the current state of most people; it’s not too tragic. The market will give you a small opportunity to break even, but it depends on whether you can seize it, which may take a long time.
How do purely rational people lose money? They firmly believe that the price will reach a certain target and always wait for the price to trigger a take-profit after opening a position. In a good scenario, the price indeed triggers, and they make a profit. However, the reflexivity theory tells us that the price will further develop towards a larger space under the influence of emotions, which means they end up selling too early. You can guess what these top smart people will do? They think the price has overshot and needs correction, then they start to "catch the falling knife," continuously losing money as they increase their positions until they die just before dawn. The market ultimately validates their logic, but that is after they have been liquidated.

Similarly, based on strong bearish fundamental factors, shorting is definitely the right move. However, this rebound is too strange; these top smart investors will continuously add to their short positions at high points, firmly believing that the price is unreasonable. Indeed, there have been instances where a return to fundamentals occurred, but that was only after liquidation.

Emotions become simpler: at the beginning, you dare not buy when prices rise; in the middle, you wait for a pullback; towards the end, you can't help but enter the market and then get trapped. Those who are slightly less foolish will choose to cut losses, while those who are extremely foolish will choose to hold onto their positions. If you're lucky and follow the trend, there might still be a chance for you to break even or even make a profit. If you chase the wrong direction and don't cut losses, just wait for liquidation.

Those second-tier smart people know not to go against the market; they understand when to be bold and when to be cautious. They wait for unreasonable corrections to reach their end before carefully starting to get involved. Once the sentiment has played out and the price has deviated far from the fundamentals, that is the time to be bold and heavily invested. This is referred to as multi-cycle resonance in technical indicators. Many people only know that this is a good position but are never clear about the essence behind it. When these smart individuals start to act collectively, it is the perfect moment to catch the wave.

5. Die from impatience.
Trading is the art of waiting; a high win-rate opportunity is always earned through patience. Everything you do must be planned. Before entering, organize your own logic: are you looking to earn rational money or emotional money? Unfortunately, most of the rational money is often priced into the market by institutions just moments after data is published, seizing the price at what they consider a reasonable range before you can react. What you can do is to capture the residual heat of emotions to trade in the direction of the trend, or refrain from participating and wait for a deep correction before considering trading in the direction of the trend. The former requires you to be bold and decisive, trusting in the power of chaos. The latter requires you to be sufficiently cautious and patient, believing that the power of rationality will overcome emotions.

6. Die without setting a stop-loss,
An interesting phenomenon reveals why most people consistently incur losses. Because humans are animals, they carry animal instincts such as the tendency to take profits and loss aversion. This common phenomenon in nature shows that when species act according to this habit, it reflects a balance between different species and within the same species. However, the intelligence differences between people can sometimes be greater than that between humans and dogs, as people are easily carried away by emotions. Remember this: the winners in the market are a very small number; if most people could make money, this market theoretically would not exist, and it would quickly disappear due to liquidity exhaustion. Therefore, if most retail investors can make money, it can only be seen as a coincidence, not the norm. Thus, one must stand opposite to most retail investors and discard human nature in trading. This requires strict stop-loss measures, aiming for big gains and small losses, and holding tightly to institutional players, as they are the harvesters of retail investors. Why is it necessary to stop-loss? Simply put, stop-loss is a form of insurance and a fallback for seeking aggressive opportunities. If one is unwilling to bear the costs of patience, they must be prepared for the maximum losses that a lack of patience may incur; it is a necessary means to pursue profit maximization.

7. Die from ignorance,
People often classify things they cannot understand as metaphysics. This is because humans can never fully comprehend this world. To some extent, metaphysics aligns with people's psychological sense of belonging, leading them to believe that if they fail, it must be due to bad luck, and not a problem with their actions. Essentially, this is an external attribution, which is part of human fundamental coding. Looking around the world, conflicts arise every day, and daily life is filled with trivial matters. One could say that the reason people can survive is due to sufficient emotions; in trading, people often fail because of emotions. When discussing the certainty of trading, if so-called masters cannot explain clearly, it’s actually because they do not understand themselves. They use vague language to speak about grand principles, saying that if you succeed, you have attained enlightenment, and if you fail, you just haven't grasped the principle yet. This is essentially nonsense, because from a mathematical perspective, when looking at the direction of long and short positions in a simplistic manner, the probability is always 1:1. The most important thing in trading is information, and most people cannot obtain timely information; with insufficient capital, they are destined to be at a disadvantage. For ordinary people, from the moment they participate, they have already lost. Yet, we want to participate; we enjoy this thrilling feeling. This mathematical conclusion that proves most people are doomed appears so pale and powerless in the face of emotions.

What exactly should be done? The essence behind this involves mathematics, including Kelly's formula for position management, Bayesian conditional probability, Markov chains, maximum likelihood, what independent events are, what dependent events are, and it also involves knowledge of psychology. In summary, mathematics provides position management, patiently waiting for opportunities, and utilizing emotions.