When can you be confident in trading, and when can't you be confident?

Red and Green Guide: In trading, we should view confidence rationally and avoid blind confidence. That is: we must be confident in our trading abilities, confident in our trading system, and confident in the market, but we must never be confident in the direction of our trades.

Confidence is the best manifestation of a trading mindset. Many successful investors in the market have experienced countless failures or even bankruptcy before achieving success. However, because they firmly believed they would succeed, they persevered in the market, made comebacks, and eventually reached enviable heights. But we must not become blindly confident because of this. We should clearly distinguish which aspects of trading require confidence and which do not.

1. Be Confident in Your Trading Abilities

Being confident in your trading abilities is a common trait among successful traders. Those who succeed in trading have experienced countless failures. The reason they didn’t disappear from the market like others is that they firmly believed they would succeed.

Failures have given them genuine trading abilities. Knowledge can be learned, but improving abilities solely through book knowledge is far from enough. Only through actual trading, experiencing losses and gains, can one ultimately develop their own abilities. Investors must not remain stuck in theoretical research detached from actual practice.

Profits are a reflection of comprehensive abilities, not something that can be achieved through a single method or system. This ability is more about a deep understanding of the market rather than a simple trading formula.

The randomness and instability of the market mean that even those with strong trading abilities may suffer heavy losses. But because they have unwavering confidence in their abilities, they won’t be crushed by such randomness and instability.

Losing confidence in your trading abilities is the only true sign of failure. Indeed, as long as you still have confidence, anything can change. Therefore, we must always remain confident in our trading abilities. Otherwise, you should consider leaving the market.

2. Be Confident in Your Trading System

A trading system is a crucial tool that helps you analyze and determine the state of the market and how you should trade. Once you’ve chosen a trading system, you must not change it lightly, nor should you doubt its signals. Indeed, the signals from the system often seem hard to understand or execute, and many excellent trading opportunities are lost due to hesitation and doubt about the system’s signals.

But think calmly: how have trades based on your subjective judgments turned out? The system’s signals don’t appear based on your preferences—they appear based on market changes. They are the most objective and truthful, free from any emotional bias.

Subjective judgments in trading often lead to suffering. Only by acknowledging reality and respecting objectivity can you adapt to market trends and changes, keeping pace with the market. The system will overcome your trading weaknesses, help you make the right decisions, help you conquer yourself, and allow you to ride the market’s waves. However, every system has weaknesses. By adopting a system, we must also accept its flaws.

3. Be Confident in the Market

The market often enters prolonged consolidation phases, lasting longer than you might expect or tolerate. This can make you lose confidence in the market, dampen your trading enthusiasm, and cause you to lose focus—potentially leading you to change your trading strategy. Losing confidence in the market is extremely dangerous!

Truly valuable investment opportunities never come easily. Market consolidation is not just a normal market phenomenon—it’s also a test of an investor’s confidence. Major trading opportunities form after long periods of consolidation.

The market is like a battlefield—there won’t be major battles every day, but when one does occur, it won’t end in just a day or two. Extended consolidation may reduce our trading enthusiasm and focus, but it must never reduce our confidence in the market.

We must always remain confident in the market. This confidence ensures you won’t miss major trading opportunities and allows you to seize opportunities early in market movements. Otherwise, every opportunity will pass you by. By the time you turn your attention back to the market, it will already be in a spectacular rally, leaving you with nothing but regret.

At all times, we must remain confident in the market—this is an indispensable condition for seizing major trading opportunities.

4. Never Be Confident in Trade Direction

Trading in the market involves risk. A rigid bullish or bearish mindset will lead to losses. Market movements always defy our predictions, and our trading ideas or directions must adapt to market changes. While unwavering confidence is crucial for success in other areas, it is harmful when it comes to trade direction.

Those with rigid views on the market refuse to acknowledge the true price movements. They remain trapped in their illusions, convinced the market will move in their favor. Every minor favorable fluctuation is seen as confirmation of their view—until they are deeply trapped and forced to exit the market.

"Die-hard bulls" or "die-hard bears" will eventually lose everything and leave the market because they simply don’t adapt to market dynamics. Those who insist they are right cannot face their mistakes, let alone correct them. This leads to deep losses and prevents new trades.

In summary, in trading, we should view confidence rationally and avoid blind confidence. That is: we must be confident in our trading abilities, confident in our trading system, and confident in the market—but we must never be confident in the direction of our trades!