The advice "Reduce your position size to suppress your emotions" is wrong🧵

Position size is a critical part of strategy.
It is not something to be determined based on emotions.
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"If you are scared, reduce your position size" is often said, but this view is wrong.
I want to put an end to this wrong copy-and-paste advice that keeps being posted.

Why is this view wrong?
The reasons are simple.
・Determining position size "based on emotions".
・Remaining stuck in the viewpoint that "losing is bad".
・Position size is an extremely important aspect of strategy, yet it is being neglected.

You must change the premise that losing is bad.
Do not console yourself "afterwards" that a loss is a cost; make it function as a true cost that was "calculated beforehand".

And it is precisely because "you understand it truly functions as a cost, are convinced of it, and are utilizing that cost" that emotions which deny it cease to appear.

The logical sequence is important.
It is not that you change position size to suppress emotions; rather, your associated emotions change precisely because you mathematically understand the necessary position size.

Wrong: Emotions → Change in Position Size
Correct: Calculate cost per trade based on strategy performance → Calculate position size that allows safely collecting samples long-term with 0% risk of ruin → Emotions that match that

When the system ends, it is when your consistency ends🧵

The cause of a system ceasing to function is not in the market.
It is not that the system ceases to function; rather, "you" cease to function as a part of the system.
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When a strategy or system stops working, it is not that the system has reached its limit.
Only your mind has reached its limit.

Many traders cannot maintain consistency for even thirty trades, nor can they continue consistent trading for even a single year.

Yet they judge that "the system has stopped working".
What has reached the limit is not the system but always your own mental limit.

People who go bankrupt with a 90% win rate strategy🧵

Immature traders go bankrupt even with a 90% win rate, while superior traders make a profit even with a 45% win rate.
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In trading to make a profit, the win rate is not a significant issue.
However, many traders seek a high win rate, thinking that a "high win rate strategy = good strategy".

At the root of this is the mindset that "winning is good" and "losing is bad", and because they perceive losing as failure and try to avoid it extremely, they seek high win rate strategies.

However, as long as such a mindset exists at the root, you will not succeed, no matter how high the win rate is.
No matter how much you seek a high win rate, a 100% win rate is impossible, so at some point, you will need to lose.

The actions of trying to avoid losses and seek wins create strain in trading, and that energy will lead to your own ruin.

A strategy that avoids losing streaks does not exist🧵

What we absolutely must do is define and recognize what a losing streak is.
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I am always talking about losses and losing streaks, and the reason for that is because the perception of losses is extremely important for a trader.

When you are winning, it is easy for anyone to keep following the rules.
Talking about easy things is not very meaningful.

A trader is tested when they are losing, when they are on a losing streak, and at this time, various things are tested, such as your qualities as a trader, prior preparation, trust in the system, understanding of probability, the sample size you are focusing on, whether you have a long-term perspective... etc.

In other words, unless you are truly mature as a "trader," you cannot maintain consistency.
The very time that consistency is tested is "when you are losing," "when you are on a losing streak."

What is needed for a trader is not "predictive ability" but "the ability to continue" 🧵

Many people think of traders like "prophets who accurately predict the future", but this is essentially wrong.
To succeed as a trader, a completely different ability is needed.
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Generally, the purpose of trading is "to make a profit", but many people misunderstand it as "winning the trade right in front of them".

However, even the world's best traders can have losing streaks in the short term, and complete beginners can luckily have winning streaks.

What this fact means is that success in trading is not something that can be measured by "short-term wins or losses".
As long as you emphasize the random results that occur in the short term and view trading as a "game of winning or losing", it is impossible to achieve continuous success in trading.

Don't prioritize "intuition" 🧵

What you need are rules with a statistical edge, and the rules don't exist for you to win the single trade right in front of you.
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Only traders backed by the sample size of extensive experience can utilize intuition.

Even for gaining that intuition, consistency is necessary, and haphazard "discretionary judgment" is simply a lack of consistency.

An excellent jazz player's improvisation, no matter how much they say they are "doing it by intuition," isn't random finger movements but is based on extensive experience.
Excellent discretionary traders are also based on the large sample size of extensive experience.

However, many "discretionary" traders are simply inconsistent traders who have never even continued the same consistent trades for "just" one year.
The "intuition" they use is mostly rooted not in the sample size of extensive experience, but in emotions like anxiety, fear, and greed.

What's truly dangerous in trading is your mistaken "good intentions"🧵

You think you are always learning from every loss, taking countermeasures so you don't lose the same way next time, making necessary improvements, and moving forward.
That is a mistake.
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The single phenomenon in front of you is random, and just because it was a losing trade does not mean your trade was bad.

Utilizing the law of probability means utilizing the law of large numbers.
It is important to accept the inevitably occurring losses as random and converge towards the true probability through a large sample size.

If you regard the losing trade in front of you as a failed trade and, each time, readily change your methods to adapt to that single phenomenon thinking "I should have done this," you cannot trade consistently, a large sample size under consistent rules will not be collected, and therefore, the system's performance that should inherently be drawn out will not be.

The market is one and only, therefore be consistent🧵

Thinking "Because the exact same chart as the past never appears twice, the same trade cannot be made" is wrong.
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I have heard the assertion "Because the exact same chart never appears twice, the same trade cannot be made", but this is a complete lack of understanding of trading.

Rather, it is the opposite; it is precisely because the exact same chart never appears twice that we utilize probability.
Trading is not about predicting the future of the market and guessing it correctly.

And, the idea that "the exact same chart never appears twice = the same trade cannot be made" is fundamentally wrong.

What is important is not searching for the exact same chart as the past, but "continuing to act according to the same rules".
Through this, a large number of trades based on those rules accumulates, and the Law of Large Numbers works on that accumulated sample size, causing probability to converge.

Why your "improvement" sabotages your trading 🧵

Many traders are trapped by the well-intentioned idea of "learning and improving every time they lose".
However, this very "improvement" might be your greatest enemy.
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To extract the edge from a system (strategy) with an edge using probability, consistency is absolutely necessary.

Short-term results are random.
Even if it seems like there's a pattern, it's just a pattern the human brain "wants to find".

Feeling like you "must change something" after a losing streak is natural, but it is a fundamental mistake.

The probability you are trying to utilize works through the Law of Large Numbers over a large sample size, but that sample size naturally includes losing streaks and drawdowns.
In other words, probability won't work unless you accept losses and losing streaks as part of forming the edge.

The very act of trying to improve causes you to abandon consistency mid-way through building the necessary sample size, thereby erasing the system's edge.

Don't complicate trading 🧵

Just "enter according to the rules", "exit according to the rules", and "wait according to the rules".
The reason why this simplicity is the most difficult is that the mindset of placing value on wins and losses gets in the way.
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Most people feel "trading is difficult" not because of a lack of technical understanding or the absence of a strategy.

The real difficulty lies in the extremely simple action of "just following predetermined rules" being obstructed by "your emotions, opinions, or attachment to winning and losing".

In reality, the task of "mindlessly repeating predetermined actions" tests the purity of your belief more than your knowledge.

No matter how much of an edge your system has, the reason you cannot realize it is always you🧵

Probability works through the Law of Large Numbers, and what is required of you there is consistency.
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A system with an edge is one where profits ultimately remain precisely because you cut losses based on rules; the edge lies precisely in those losses, and the edge functions only by including those losses.
Denying losses is the same as denying the system itself.

“Win/Lose” → “Exit”🧵

“I had 3 wins and 2 losses today.” “I took a huge loss yesterday.”
If you sense the nuance that “you personally fought against the market and won or lost” from these expressions, your self-esteem is dangerously tied to winning and losing.
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For traders who tie their self-esteem to the outcome of winning and losing, every time you use the words “win” or “lose,” you continually swing dramatically between feeling insulted or feeling superior, based on the result.

Since results are heavily influenced by randomness and beyond your control, these randomly assigned sensations of pleasure and humiliation create an addiction-like effect similar to gambling.
The more you trade, the stronger your obsession with winning and losing becomes, eventually making it absolutely impossible for you to succeed in trading.
In this state, you will never achieve consistency, and probability will no longer function effectively in relation to your strategy.

The more you value winning or losing and seek it strongly, the more inevitable actions and decisions based on this mindset become.
Repeating such behaviors traps you permanently in a cycle that ensures absolute failure.

Examples of these “actions and decisions strongly motivated by placing value on winning and losing” include:
・Delaying stop-losses to avoid losses,
・Exiting trades prematurely due to fear of losing unrealized gains,
・Frequently averaging down to increase your win rate at the cost of higher risk,
・Taking reckless position sizes or revenge trading in hopes of achieving a big turnaround,
…and so on.

These behaviors are essentially equivalent to repeatedly taking actions with extremely poor risk-reward ratios.
This generates a large sample size of highly disadvantageous methods, against which the law of large numbers inevitably works, making it impossible to succeed no matter what you do.

The cause of revenge trading is not emotions🧵

Many people think they engage in revenge trading because of emotions, but the root cause is your thinking that produces those emotions.
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"Frustrating".
"I absolutely must recover the loss".
"I cannot let the day end in the negative".

You cannot resist revenge trading; even though somewhere in your head you think "I should not do it", in the end, you cannot stop revenge trading.

You might think, "The cause is my emotions exploding", but emotions are the "result", "not the cause".
The real cause is your wrong perspective on trading and the meaning you assign to wins and losses, which generate those emotions.

Although you think in your head "I should not do it", you still do it because, deep down, you believe "the win or loss right in front of me is more important than following the rules" and "feeling better right now is more important".
No matter how much you think you know intellectually about the importance of rules, if deep down you believe "the win or loss right in front of me is more important", corresponding emotions will appear and try to make you "take action accordingly".

You have no choice but to mature as a trader🧵

This world is dangerous.
If you are immature, you will attract “immature people who are smarter than you,” and you will be deceived.
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A truly mature trader “embodies” probabilistic thinking.
Through the process of that maturity, they have completely detached wins and losses from their own responsibility, and they repeatedly execute consistent trades in a place entirely unrelated to winning or losing.

Since they place no value on wins and losses, they naturally do not rejoice when they win, nor do they try to boast.
It’s the same as not bragging about waking up on time and brushing your teeth as usual.

They won’t appear in front of you to brag about the amount of profit they’ve made, nor will they try to provoke you using their trading results.

In other words, your chances of encountering a truly mature trader are quite low.

Why does having a system (strategy) with an edge still not work out🧵

Many people fail even when they have a highly capable system.
Here’s why.
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Even if you have a “system with a probabilistic edge,” the reason it doesn’t work is simple.

Probability functions through the “law of large numbers” over a large sample size, and for that to happen, your consistency is essential.
If probability doesn’t work, it means the law of large numbers doesn’t work.
And the reason it doesn’t work is either:
- you lack consistency, or
- the sample size is not large enough for the law of large numbers to apply.

In other words, no matter how strong your system’s edge is, it can only function through your long-term consistency.

Do not feel responsibility for trading results🧵

This is not a suggestion to be lazy and irresponsible, but a suggestion for having the correct stance to make probability work.
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Many traders feel responsibility for results and think, "I must do something about this loss."

Having a sense of responsibility is a good thing.
However, you are bearing too much responsibility for results, and the responsibility for "following the rules", "remaining consistent", and "thoroughly preparing and practicing beforehand" is being neglected.

What you should be responsible for is "continuing to follow the rules" and "thoroughly preparing and practicing beforehand."
And if you have taken responsibility there, let go of the other responsibilities.
How much you can let go of responsibility for results is important.

This is the correct way for a player of the "game of probability" to feel responsibility.

Trading is "waiting" 🧵

People who cannot wait are not suited to be traders.
The majority of trading is waiting.
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Because short-term results are strongly influenced by randomness, we need to repeat consistent actions and let probability work through the sample size.

To keep following consistent rules, it is necessary to "wait", but many people cannot wait, and even when the market environment isn't yet right for action, they worry, asking "how should I think about this so I can trade?", or regret, thinking "if only I had traded, I would have made a profit."

Since your rules say "do not trade in the current market environment", no matter how much the chart moves, you must do nothing, and it is not something you should be trading.
Regretting, despite doing nothing wrong and, in fact, doing the right thing, is the fundamental mistake itself.

You misunderstand that gaining profit is "a good thing" and "the correct answer"; that thinking is the very definition of a "win-loss game" and stands in direct opposition to the "game of probability".
The moment you prioritize "gaining profit" over following the rules, it is guaranteed that you absolutely cannot succeed in this uncertain world of trading.

The moment you fear stop-loss, you have already lost🧵

As long as you think "stop-loss = failure", you are not even participating in the game of probability.
As long as you misunderstand the meaning of edge, you will never achieve consistency.
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First, you must understand that "an edge is not something that can be directly drawn from the market".

Many people might think, "Eh?".
but a great many traders misunderstand this.
The phrase "an edge exists in the market" is only half correct, and without understanding the other half, it is completely meaningless.

An edge lies within the "sum total of wins and losses" repeated through consistent rules.
In other words, an edge is less something drawn from the market and more "the consistent action itself" and "something drawn from the sample size" resulting from it; it does not mean that "winning a single trade = drawing an edge from the market".

The often-heard phrase "there is an edge here in the market (chart)" contains the hidden premise "if you repeatedly trade at chart points like this" (super important!!), which means it depends on the sample size, but many beginner traders cannot understand this and try to seek the presence or absence of an edge in the immediate win or loss before them.

This means that while the phrase "an edge exists in the market" is half correct, it is utterly meaningless without the understanding that the hidden premise "through the sample size" exists.

Because this is important, I will say it again: an edge is not drawn from the chart in front of you, but is "something drawn from the sample size" by utilizing the chart in front of you.

Precisely because they do not understand this, many traders discuss edge based on the immediate wins and losses and cannot be consistent.

A signal is just a signal and is not something that supports "your opinion" 🧵

When you start thinking "Is it likely to go up, or is it likely to go down?" while identifying signals through chart analysis, "the distinction between the signal and your opinion becomes ambiguous," expectations and wishful thinking are born, the value of the result right in front of you increases, and not only do you become unable to simply follow, but losing also brings discomfort and destroys subsequent consistency.
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Many traders say they "hesitate on entry", but they often place too much importance on the value of their own opinion.

First, fundamental reasons for hesitating on entry include placing too much value on the result right in front of you, not understanding the basics of randomness—that the previous result and the current trade are independent events with no relationship whatsoever, not being able to trust the signals of your own strategy, insufficient preparation, focusing on too small a sample size, not understanding probability, and so on; but this time, we will set those aside for a moment and introduce one technique: "viewing a signal as just a signal".

"A signal is just a signal".
A signal does not indicate whether it will go up or down; it is merely a signal instructing you to take a specific action.
Do not think about any meaning beyond that.

The moment you start thinking in terms of “how much can I make this month,” the collapse begins 🧵

There is no such thing as a “monthly income” in the market.
The moment you're controlled by short-term goals, everything starts to fall apart.
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“I want to make $3,000 this month.”
“Just $300 more to hit my target.”
This kind of thinking has the following negative effects on your behavior:

- Forcing entries at points you normally wouldn’t trade
- Starting to “cherry-pick” signals
- Taking profits early when you should be letting them run
- Increasing lot size to aim for a big hit
And so on.

All of these lead to “emotion-driven trading” based on your own convenience, completely unrelated to the system’s edge.
As a result, consistency breaks down, and probability stops working.

Thorough Explanation of a Trader’s Job 🧵

If you want to become a trader, understand what a trader’s job actually is.
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A trader’s job is to generate profits through trading, but many traders misunderstand it as “making money from the trade right in front of them.”

No matter how great a trader is, if they only get to trade once, that single trade could still be a loss.
On the other hand, even a beginner trader could win a trade just once.

We are not playing a game of seeing how much we can earn from a single trade.
In this world that is heavily influenced by randomness, in order to keep growing our capital, we must shift from a “win-lose game” to a “probability game.”

Our job as traders is to understand the rules of the “probability game,” and to continuously repeat actions in accordance with those rules.