What Is Trading Cognition?

Some traders have studied a lot of market theories and technical indicators, but why are they still unable to trade well? They don’t know which direction to work on next, and then they fall into confusion.Some traders know that trading knowledge is very important, but they don’t know what trading cognition is and how to improve it. This is the confusion of many traders. I will introduce to you a thinking framework. Through this thinking framework, you can know what trading cognition is and enable you to see the full picture of trading and the stage you are in. This thinking framework is a Taoist magic weapon.

So what is a Tao magic weapon?Give an example to illustrate:

Cars are Qi, driving skills are numbers, and numbers are more important than Qi.

If the person driving the Audi has good driving skills and the person driving the Alto has poor driving skills, who will get there first?

Some people think that Audi’s cars are good and its driving skills are good, so Audi should come first, but not necessarily. Although his Audi driving skills are good, if he takes a country road and Alto takes a highway, Alto may arrive first. The path choice here is Dharma, Dharma is more important than magic and Qi, the direction is Tao, and Tao is more important than magic Qi.

Through this example, we understand the four levels of magic weapons in driving. Let’s summarize.

It is the essence of a thing, the underlying laws, the principles and methodologies that guide things, and the specific techniques and methods for doing things.

Instruments are tools to improve the efficiency of doing things. Nothing can be understood clearly through a single dimension. Only through the four dimensions of Tao, Dharma, Technique and Instrument can the whole picture be seen clearly.

So, in terms of trading,What does the Tao magic weapon correspond to?It is the underlying laws of market operation and the nature of transactions.

The method is the method of establishing strategies, the method of risk management, and the principle of account growth.

Technique refers to market analysis and trading strategies, and T refers to candlestick, technical indicators, program software, etc.

All your knowledge and understanding of trading in the four dimensions of Tao, Dharma, Technique, and Instrument constitute your understanding of trading. From a macro perspective, trading is the process of realizing your knowledge. There is a saying in the TV series Tiandao, which is that if there is a way but no skills, the skills can still be sought. If there are skills but no ways, then the skills will stop.

As mentioned in the previous video, profitable trading strategies are supported by underlying laws. This is the truth. Once you understand the underlying laws of the market and the nature of trading, it is not difficult to form a trading strategy. However, if you only adhere to the rules and conditions on the surface of the strategy and lack an understanding of the underlying laws of the market, then your strategy will lack the cornerstone of profitability, and your transactions will have no direction and will stall.

Many traders are keen on pursuing external techniques and tools, while ignoring the inner Tao and Dharma.

Most traders start learning from Qi, that is, from technical indicators. Technical indicators have clear parameters and visual graphics. For traders who do not understand the market, they can form a relatively objective judgment on the market through simple learning. This is where the indicators are friendly to newcomers. However, if the research on trading stops at technical indicators and invests too much energy on the gas level, then trading will stagnate.

Whether it is technical indicators or quantitative procedures, they should be tools you use to improve your trading efficiency after you understand the nature of the market.

If you understand the four dimensions of trading, method, technique, and period, then you will have methods for establishing trading strategies, methods for risk management, and guiding principles for account growth. This is a complete set of methodologies to guide trading, which together form a trading system.

The content of the trading system belongs to the legal level and is used to guide trading, but many traders use it at the technical level.

Of course, no matter what stage you are a trader at, I recommend that you focus your research on the moral level, that is, the underlying laws of the market and the nature of trading.

Some people may do stocks, some may do futures, some may do Forex, and some may do digital currencies. Although different markets trade different targets, all markets have a common starting point, that is, market traders are here to make money.

Everyone has to invest funds and participate in the market buying and selling through orders, and the orders will form prices after operation. The prices are expressed through the candlestick chart, and then various technical indicators are calculated based on the candlestick. On this entire path, if you understand every link clearly, you will be able to find the underlying laws in the market.

Through the thinking framework of Taoist magic tools, you can understand what is the cognition of trading, know where your cognition is lacking and what needs to be supplemented, and see clearly your stage and the direction of your next efforts.