The story above is an extremely rare event in reality, but it’s not unheard of, and I sincerely hope it never happens to any of us. However, it serves as a rather accurate (and brutal) illustration of how the financial markets operate. The uncertainty, danger, and indifference of the markets pose significant barriers for anyone on the quest to find their own “Holy Grail.”
I, too, am walking that path, and I’m fortunate enough to have partially achieved the first part of the vision I just described. Perhaps the tsunami will come crashing down unexpectedly, but I am prepared—a helicopter is parked right next to the chair I’m lounging in. Hopefully, I’ll escape the wave, unless, of course, the helicopter suddenly malfunctions.
New traders and investors often mistakenly believe that success in the financial markets only requires a correct trading strategy. While this is indeed important, it is only part of the equation. The financial markets are always susceptible to extreme events with low probabilities of occurring, yet these events can profoundly impact your entire investment journey—they can either bring you tremendous wealth or take away everything you have. The history of financial markets is riddled with countless instances of booms and busts. Time and again, events that were deemed "impossible" by everyone, including the most seasoned experts, have occurred—and they will undoubtedly happen again.
Since I began trading, I’ve made it a mission to find and read every resource I could, exploring the methods and theories claimed to be the “most accurate” about the market. If you browse the internet or trading forums, you’ll easily come across dozens of theoretical systems. Many of them seem to offer significant potential, such as methods based on “price action,” reading the order flow of “big players,” or ideas around “smart money,” hunting stop losses, and liquidity. These systems often take turns stepping into the spotlight, gaining widespread attention and praise as traders adopt them. Yet, they eventually fade away when participants realize the systems fail to deliver consistent results or prove too challenging to apply effectively in real-world trading.
I’ve personally programmed Expert Advisors (EAs) and automated signal indicator systems to test and implement many of these strategies. Based on the data I’ve gathered, I’ve come to realize that most of these trading systems can only generate profits in the short term. For instance, on a single currency pair, a specific stock, or a single time frame, a strategy might show an upward-sloping profit curve over a few years. However, beyond that period, the profit curve often starts trending downward, eventually returning to the starting point.
So, is there a consistently winning strategy in the market?
I wish I had someone to answer that question for me when I first started trading. I am someone who places great trust in science and data. Most of the trading knowledge available today doesn’t demonstrate its effectiveness through data, or if it does, it’s often limited to isolated examples that lack statistical significance.
Although proving something based on past data is inherently uncertain—since a single future event that contradicts it can render it false—it still holds value. It’s like seeing a million white swans: you can’t conclusively declare that all swans are white because observing just one black swan would disprove that notion. However, by paying close attention and observing carefully, we can gain deeper insights and reach more nuanced conclusions, such as: “Swans come in different colors.”
Validating a method’s results through data doesn’t guarantee its accuracy in the future, but it is highly beneficial for a trader’s psychology—the fundamental basis for consistency. It’s similar to learning from someone who has succeeded in a certain field or reading a book: at the very least, it is grounded in that person’s experiences and observations. If everything is uncertain—whether absolutely or due to the limitations of our knowledge—it’s better to trust what has been observed and tested in practice.
Uncertainty may simply be an illusion created by our lack of understanding of a phenomenon. For instance, when you roll a dice, if you could calculate every factor affecting it, you would be able to predict the exact number it lands on. However, due to insufficient computational ability and knowledge, you conclude that the outcome is random. Conversely, believing that something is non-random—such as the lottery results at 6 PM—can also be an illusion, stemming from overconfidence in your understanding. You might think it’s possible to use a set of rules to calculate today’s winning number, but that belief may reflect a misunderstanding of the inherent complexity or true randomness of the system.
The Efficient Market Hypothesis (EMH) posits that movements in the financial markets are entirely random, akin to flipping a coin. According to this hypothesis, no trading strategy can consistently generate returns above the general market growth rate. As a result, it suggests that we should avoid frequent trading and instead adopt a buy-and-hold approach with stock indices. In reality, however, there is evidence and statistical data indicating that markets are not entirely random; there are moments when they exhibit inefficiencies. Yet, these statistical findings often rely on inductive reasoning (extrapolating characteristics of a small sample to infer those of a larger population). This approach inherently carries uncertainty because our larger population—the market—can be considered infinite. We cannot assert with absolute confidence that the statistics we observe accurately describe it. Moreover, the market comprises countless interrelated variables, with new variables continuously emerging, potentially altering its characteristics. Therefore, for now, we can reasonably assume that the movement of the financial markets is inherently uncertain.
So, if a consistently winning strategy truly exists in the market, how would it operate? Can we trust that it will continue to work in the future? Or is it all just a gamble with randomness that we have no way to overcome?
In this blog, I will strive to share the knowledge and experiences I’ve gathered throughout my journey to address those questions. While the answers may still be uncertain—since no one can predict the future—I believe that having data and experience is far better than wandering aimlessly in uncertainty.
This blog aims to provide quantitative traders with a fresh perspective to advance their careers and give discretionary traders the confidence and evidence to trust their intuition. You might wonder why I’m sharing these insights—why not keep them to myself and just make money quietly? I’ve thought a lot about this. I used to believe that sharing my experiences and strategies could lead to their widespread adoption, potentially rendering them ineffective in the market, leaving me unable to profit. Moreover, I don’t even know who you are, and helping you doesn’t bring any direct benefit to me.
That may be true—if a method or opportunity proves effective, many people will use it. The consistent profits made by some traders could cause the market to react against that very method. In a zero-sum game, where money is continually withdrawn, the pool of funds would eventually dry up, rendering the method ineffective. However, I have a different perspective on the financial market. I believe it is not a zero-sum game, as many claim. Therefore, sharing my insights likely won’t have any adverse impact. Furthermore, my approach is highly flexible. Even if certain aspects of the method become ineffective in the future, the foundational principles will still guide us in developing new ways to adapt and capitalize as the market evolves.
The perspectives and knowledge I’ve accumulated come directly from my trading journey. I’ve distilled and validated them through data, discarding anything unsupported by empirical evidence. This process has allowed me to develop my own unique view of the market and find ways to apply it effectively in practice.
Another reason I decided to share is that my life has significantly improved since I first started trading. No longer needing to expend so much effort worrying about basic necessities has given me the space to reflect more deeply on life. I’ve come to realize that after reaching a certain financial threshold, having more money doesn’t necessarily bring more happiness. One day, when we pass away, we’ll likely be forgotten. But if we document our perspectives and thoughts, they may live on. That’s why I’ve been inspired to write and share my experiences in this field, hoping they can be useful to others. Doing so undoubtedly brings me much more joy and fulfillment.
I am a full-time trader. Although I studied economics in college, most of the knowledge and experiences I share with you were not acquired during my time in school. The majority of it was accumulated after I began trading professionally. I am neither an economics expert, a programmer, nor a data analyst. What I do is largely based on my personal experience and perspective rather than following a structured process. As a result, my explanations might not always be methodical, and I hope you can understand and overlook any shortcomings in my expression.
I am someone who values practice above all else. Whenever I want to explore or participate in a new field, the first thing I do is take action rather than delve into theory. The power of action is immense, and if you’ve ever read books about wealth-building or studied the mindset of successful people, you’ll see this truth. Action, action, and action—this is the first step that sets everything in motion and leads to success. Of course, success depends on many other factors, but action is the first thing you need. If you want to win the lottery, the very first step is to go out and buy a ticket.
In my opinion, the best way to accumulate and absorb knowledge is to follow this sequence: Practice → Fail → Learn → Adjust → Practice → Fail → Learn → Adjust...
In this blog, I will strive to describe everything from my own perspective, based on the data I’ve gathered through my hands-on experience in the market. I will focus on what makes money, as the ultimate goal of our participation in the financial markets is profit.
Although I will try to present everything in the simplest way possible so that everyone can understand, I have been trading and working in the financial markets for quite a long time. As a result, many concepts and definitions about the market have become second nature to me, almost reflexive. There may be parts where I unintentionally skip explanations of technical terms or use terminology that differs from official references. It’s similar to how you don’t need to consciously think about or explain what your hands, feet, eyes, or nose are—they simply exist and function without much thought.
Next, I want to share with you that generating profits in the financial markets is extremely, extremely difficult—and even if I wrote the word "extremely" 100 more times, it still wouldn’t fully convey just how challenging it is. This is something you must embed in your memory, so you always keep the worst-case scenarios in mind and remain vigilant in protecting your capital.
The difficulty of generating profits in the financial markets stems from numerous factors. The primary reasons are its inherent uncertainty and non-responsive nature, which create significant challenges because our actions and thought processes about how the world works often contradict these characteristics.
We tend to believe that “nothing is truly random” and that we frequently have the ability to “impact and change our environment.” This mindset has been ingrained in us since primitive times. Humanity was granted a significant evolutionary advantage: intelligence. We used it to reshape and adapt our surroundings, creating tools to serve our purposes. Almost every action we take in our environment elicits an immediate response, providing a rapid feedback loop. This feedback loop has been crucial in helping us develop skills and grow.
Throughout this process, dualistic thinking has been deeply ingrained in our subconscious. Everything we observe is categorized as either right or wrong. We always strive to be "right," as it is a critical requirement for survival. Thanks to our exceptional intelligence and the ever-growing accumulation of knowledge, we have progressively identified more "truths" while reducing the scope of uncertainty. Today, we can calculate the trajectories of distant stars in the sky and make astonishing predictions about the universe.
However, the financial markets operate in the opposite way. Here, we don’t receive feedback based on the usual cause-and-effect relationships. Everything is sometimes right, sometimes wrong. The same approach or action can yield different results at different times. This lack of a consistent feedback loop makes it difficult to develop reliable learning patterns. If we rely on binary thinking—judging things as simply right or wrong—we are likely to fail.
Furthermore, this industry involves countless interrelated variables, making it a nonlinear system. If you're unfamiliar, a nonlinear system is one where more than two factors interact with each other. A famous physics problem that humanity has yet to solve is the three-body problem, which aims to predict the trajectories of three interacting objects. So far, we’ve only been able to accurately predict the motion of a two-body system. Additionally, with the participation and influence of humans—beings with intelligence and highly unpredictable actions—precisely forecasting market movements is currently impossible.
Therefore, based on my experiences, I suggest that you shift your mindset to one of probabilistic thinking for everything in this field. Regardless of whether you are a brilliant doctor, an outstanding programmer, or even an exceptional entrepreneur, adopt this perspective:
"Any event in the market is uncertain and unpredictable. Nothing is absolutely right or wrong. Whatever actions you take will not influence the market. The market neither listens to you, knows you, nor cares about you. Causes are irrelevant—only results matter."
If you’re ready, welcome to my blog! Stay tuned, as I’ll be updating it with more insights and thoughts in the future. Thank you for your interest!
Best regards,
- Vu Tien - 31/10/2024.
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