Industrial Investment: How to Make Stable Profits in Foreign Exchange Investment

The movement of exchange rates is highly random, which means that: 1. Any investor is likely to make money in the short term from a local perspective, which can easily arouse people's infinite reverie about foreign exchange investment. 2. Investors have a very low probability of winning in the long run. Almost all investors have a profitable experience, but most investors have difficulty in systematically analyzing the trading process, and do not have the advanced analytical and trading techniques that institutional or professional investors have. Therefore, most investors eventually become inevitable losers in the case of occasional profits.

Like other investments, foreign exchange investing generally consists of three steps: forecasting, decision-making, and execution of the trading plan. With regard to forecasting, we must first address a philosophical question: Can the market be accurately predicted? The ancients said: "A sage can see the world, but if he is described as it is appropriate, it is an image of the reason", indicating the impossibility of accurately predicting the physical world. According to modern chaos theory, prices have a predictable side and an unpredictable side, and price movements are the unity of opposites between certainty and randomness. The existence of price certainty factors is the basis for long-term stable profits in foreign exchange investments. The following pairs of investment practices that correctly understand the predictability and unpredictability of price movements have a very important impact. Everything is predictable. To belittle scientific prediction and planning and trade based solely on the perception of the market is blind. But to think that everything can be predicted and planned before trading is blind.

Societe Generale InvestmentIt is believed that there are certain laws to follow in exchange rate movements, which are manifested in the following two aspects: First, trend and periodicity. The judgment of trend should follow three principles: objectivity, two-factor (rising and falling) and mutual verification. An important issue is that an attribute must be added to the trend: the trend in a certain time structure. Most investors tend to ignore this point. According to the principle of chaos, the price movement trajectory has the characteristics of multi-level similar nested structures, and the trend has different levels: long-term trend, medium-term trend and short-term trend (or main trend, secondary trend and short-term trend). Trends in different time structures will affect each other and restrict each other. At the same time, because investors choose different trading cycles, trends in each time structure are of different importance to different investors. Investors must clearly answer the following questions: Is my trade a long-term trade, a mid-term trade or a short-term trade? How do I define long-term, medium-term and short-term trends? With my trading cycle, what time structure price graph should I pay most attention to, and how do I deal with the relationship between this time structure graph and other time structure graphs?

Second, the psychological characteristics of the market. The essence of price movements lies in the ups and downs of the power balance between the long and the short. Psychological analysis is based on the repetition of human behavior patterns and seeks the repetition of psychological changes. Modern investment psychology research has found that investors' psychological activities have some fixed patterns and will be expressed through price patterns. Therefore, through the study of price patterns, the laws of investors' psychological activities can be captured, so as to deepen the understanding of the essential characteristics and morphological characteristics of the investment market; deepen the understanding of the essential characteristics of investment risk in the investment market, and deepen the understanding of the characteristics of the interaction between the investment market and market investors.

The second step in investing is to make investment decisions based on forecasts. Societe Generale strongly agrees with the management guru Drucker that "decisions start with perceptions". Successful investors understand that price movements are driven by future supply and demand conditions rather than current facts. Investment behavior is essentially "ideas come first, then actions". Investment decisions start with untested assumptions. Investors should know how to treat assumptions, and the only way to do it is to test them. Through testing, it is possible to find which assumptions are valid and deserve serious consideration; which ones are untenable and must be abandoned. Therefore, in the decision-making process, the following questions should be answered for any investment opportunity: 1. What direction should be taken? 2. What method should be used? 3. How much to do? (risk control measures) 4. How to judge the correct operation? 5. What should I do if the operation is correct? (fund management technology) 6. How to judge the error? 7. What should I do if the operation is wrong? (risk control + fund management).

The ancients said: It is easier said than done. The last and most difficult step in trading is to execute the trading plan. The existence of price randomness characteristics indicates that the best decisions are only approximate and risky. The difficulty of the execution process is manifested in two aspects: one is that investors must always maintain self-balance among various conflicting goals and conflicting opinions in the process of price evolution. The second is to track and confirm the market during the execution of the plan. If the original operation plan does not conform to or does not fully conform to the actual situation, it must be based on new understanding, form new judgments, and modify the plan to make it suitable for the new situation. If the market situation is unknown, it will wait and see.