Cognition is fundamental; with enhanced cognition, trading becomes more efficient and profitable, making money an inevitable outcome.

Conversely, if one's level of cognition remains stagnant, making money is a matter of sheer luck, and being taken advantage of is just a matter of time.

What basic cognitions are necessary for sustainable profitability in trading?

Understanding One: The only correct trading logic is to cut losses short and let profits run.

The secret to long-term and stable profits lies in cutting losses while ensuring that each risk is controllable, strictly managing your own risks. When profits are made, allow them to run, thus accumulating an advantage through a series of wins and losses.

By losing less when in the red and earning more when in the black, you can achieve an overall profit, which is the core of trading profitability.

Understanding Two: The market is uncertain.

Abandon the prediction of the market and stop pursuing the accuracy of each entry. Instead, adopt a mindset of entering with the intention of testing, holding if right, and stopping if wrong.

Trading is inherently a game of probabilities, and no one can predict entry points with precision. Only by truly recognizing the unpredictability of the market can you be considered to have truly entered the field.

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Many novice traders are trying to seek high-accuracy indicators, spending too much time and energy on this path. Don't ask me how I know; most people entering the trading market will go through such a period, it's just that everyone's level of enlightenment varies, and so does the time spent.Understanding Three: There is no perfect trading system, and excessive optimization should be avoided. You should focus your energy on consistent execution.

Among the vast waters, take only a ladleful.

Trading is a game of trade-offs, and there is no perfect trading system that can capture all market movements. Only by recognizing this can you avoid over-optimizing your trading system. Many people try to capture all the profits in the market, fearing to miss out on some trends, and thus are constantly optimizing their trading systems. In fact, when you have a trading system with a positive expected return, what remains is execution. Therefore, you should focus your energy on consistent execution.

Understanding Four: Profit and Loss Originate from the Same Source

The greater the risk you can withstand, the greater the drawdown you can tolerate, and the higher the returns you will achieve, much like a spring that bounces higher the deeper it is compressed.

This is reflected in money management, where the maximum drawdown you can tolerate is 20% or 40%, which will double the position size in each order, and thus the returns will also double. Any trading system that talks about returns without discussing the maximum drawdown is being dishonest.

Truly understanding and executing the above concepts is not easy. If you cannot improve your level of knowledge and comprehensively master every detail in every aspect, leaving a weakness in one area, the market will eventually present a situation that exploits this weakness. Once this weakness appears, you may lose all your gains overnight.

The best way to improve your level of knowledge is to write down your thoughts and then practice them. The fastest method is to have a mentor guide you; the pitfalls they have encountered can be avoided, saving you from many detours.

Of course, self-realization is also possible, but the process of self-realization can easily lead to mistakes.In the early years of trading, I was fortunate enough to have read all the articles written by a master, and I thought I had fully understood his content. It wasn't until many years later, when I had a face-to-face conversation with him, that I realized I had misunderstood many things he had said.

Arrogance keeps one standing still, while humility leads to progress.

Many things, many truths, can be understood after a long time in trading, but society is a race to see who understands first. Understanding early and late leads to different destinies.