Biological Traps in Trading: Why Small Wins Are More Reliable Than Big Wins?

After a period of rest, I recently returned to perpetual options trading. This reminded me of when I first started trading in 2018. At that time, the knowledge shared by some excellent traders completely changed the way I viewed the market. Although I am not good at writing, I have always been grateful and hope to pass on these valuable experiences.

There is a principle that I still find hard to forget: almost all living organisms have the biological mechanisms for winning inscribed in their genes.

Taking lobsters as an example, the winning side in a fight experiences a surge of hormones, with their body filled with serotonin and testosterone, adopting a proud posture; while the losing side curls up and falls into a self-soothing mode.

This is not unfounded. Although Jordan Peterson's views can sometimes be somewhat extreme, his perspective on this issue is fundamentally correct. Victory does indeed reshape the brain, alter posture, boost confidence, and make people more focused on opportunities rather than threats. This is a program formed over millions of years of evolution; whether it's about competing for territory or battling in the market, the brain's response mechanism is the same.

The logic of trading is the same.

Every small profit brings a sense of excitement. Each profitable trade enhances your sharpness, preparing you for the next victory. However, based on my observations, most novice traders do the exact opposite.

They pursue get-rich-quick schemes rather than accumulating stable returns; they are keen on flaunting profit screenshots instead of actual profits; they glamorize significant drawdowns, calling it "holding on to belief"; they engage in revenge trading after losses instead of thinking calmly; they compare their meager 2% unrealized gains and losses to the 10 times returns of certain insider traders.

The real winners quietly accumulate seemingly boring returns, allowing time to work its magic of compound interest.

Why Your Brain Leads You Towards Bankruptcy

When faced with failure, your serotonin levels plummet, your shoulders droop, and your eyes are filled with danger. Your ability to assess risks completely fails because your brain thinks you are at the very bottom of the social hierarchy.

So, how do traders facing bankruptcy usually respond? They try to recover all their losses with a single trade. They blindly increase their positions, chasing the next worthless coin with a market value of less than $60,000. They trust the so-called "insider information" posted by certain online scammers on instant messaging platforms.

In contrast, excellent traders are quite the opposite. They accept losses calmly, possibly spending just a few minutes analyzing what went wrong before moving on. They understand that having one down day amidst twenty up days is just normal fluctuation. They place more emphasis on protecting their mental state than on protecting their portfolio.

I often witness scenes like this: someone experiences a loss and immediately bets 20% of their principal on a pile of junk coins, like watching someone continuously slap their own face while not understanding why it hurts.

The Power of Compound Interest is Often Underestimated

Most people find it hard to understand the power of compound interest because it starts slowly and is boring. When a $10,000 account has only earned $50, you might think, "What’s the point?" But it is precisely this seemingly dull accumulation that ultimately leads to astonishing results: stable returns can be profitable in the long run, while speculative trading often comes at a high cost.

Einstein referred to compound interest as "the eighth wonder of the world". This genius, who proposed the theory of relativity, held such high regard for a fundamental mathematical concept, which is worth our contemplation.

You don't need to make huge profits every day; that's not how the market works. Sometimes you might earn 1%, other times you might break even, and sometimes you might even incur a small loss. The key is that over time, your overall gains should exceed your losses.

Take a well-known trader as an example. It is said that he keeps his net asset growth at around twice a year, maintaining a calm mindset for the rest of the time. He ensures that he does not overtrade or reach a "peak state." Those who earn 100 times their investment in a short period of time often find it difficult to retain wealth in the long term, just like lottery winners or casino winners, who often do not know how to handle sudden windfalls.

Effective Trading Strategies

Take profits in a timely manner and don’t be attached to the so-called "diamond hands." The market doesn’t care about your beliefs; it only follows supply and demand. Be sure to set take-profit levels when in profit, and cash out at least a portion of your profits each time.

Keep a record of your successes. Capture the trading records of each profitable transaction, and create a dedicated folder to review when feeling down. Your brain needs concrete evidence to prove that you are a successful person, not just memories of the moments when you made money. It's fine to share realized profits and losses, but boasting about unrealized profits and losses is usually unwise, as any experienced trader will tell you.

Control leverage usage. Initially, you can start with 1x or 2x. Only consider gradually increasing leverage after proving that you can make a profit without leverage. Leverage amplifies everything—including your mistakes.

Set realistic daily goals. Don't trade just for the sake of trading. Trading is to achieve goals, and then exit in a timely manner. After completing, go for a walk and connect with nature. The market will still be there tomorrow, and it may present a completely different appearance.

Track your win rate. Prepare a simple spreadsheet or use professional profit and loss analysis tools. If your win rate is below 60%, it indicates that there is a problem with the strategy and adjustments need to be made in a timely manner.

Establish a trading ritual. Maintain the same trading environment, time, and process. Your brain likes fixed patterns. Create a pre-trading ritual that puts you in the best state, such as having a cup of coffee, reviewing trading rules, or doing a few push-ups.

The Biggest Challenge of the Small Victory Strategy

Many people make a mistake when they start accumulating small victories: you must ensure that losses are also kept within a small range. The core of the small victory strategy lies in strictly controlling losses.

At first, I also struggled with this. My capital curve looked like a Thanksgiving turkey chart - a small upward trend for a while, then suddenly a huge bearish candlestick appeared, wiping out weeks of gains. This might be the hardest part to master in the whole strategy, but absolutely no compromises can be made. A strategy of small wins and big losses will only gradually erode your account.

Losers often do the following: they complain that the market is manipulated. They frequently change their trading strategies. They join various online communities in search of so-called "inside information." They are addicted to a gambling mindset rather than viewing trading as a career.

Successful people do this: they take losses, learn lessons, and prepare for the next trade. They understand that trading is a marathon, not a sprint. They know that consistency and stability are more important than short-term excitement.

A failure occurring once among dozens of victories has almost no impact on the overall result.

The True Path to Success

While others are betting on the next popular meme coin of a public blockchain, you might be building a truly effective trading strategy. While they are staring at their open positions all day, you may have already completed today's goals and are working out at the gym.

The real advantage lies not in some secret trading methods, but in self-discipline. It lies in viewing trading as a business, not as a casino game. It lies in understanding that the goal is not to prove oneself right, but to make a profit.

Most traders trade to prove they are right, while successful traders trade to make money; there is a huge difference between the two.

Wealth accumulation may seem dull and not cool enough. Your mundane posts about stable profits won't go viral on social media. But do you know what's even more boring? Being broke at 30 because you spent your 20s chasing that unrealizable 100x "belief position."

Most people who flaunt luxury cars on social networks are not actually wealthy. They may rely on a "lucky surge" to pose online, only to quickly lose all their earnings.

Of course, there are exceptions, but in most cases, the real winners are often those who are quietly working behind the scenes.

Focus on Victory

Small victories can accumulate momentum, and momentum allows you to enter a flow state. Lock in profits, boost confidence, and become a strong player in the market.

Stop trying to prove how smart you are, and start proving how disciplined you can be. You either win or you lose. That's the truth of trading.