Investment is the manifestation of cognition.

Your gains and losses in the stock market can be applied to the following formula:

Profit and Loss = Cognition + Mindset + Luck.

Among the three, cognition accounts for 50%, mindset accounts for 49%, and luck accounts for 1%.

Luck only determines how much you earn or lose, and it is difficult to truly affect the profit and loss.

Cognition, combined with mindset, directly determines whether investment can be successful.

Cognition is the foundation of investment and plays a decisive role. If cognition is insufficient, it is impossible to make money in investment.

However, having cognition alone is far from enough, because the transaction itself can become distorted due to changes in mindset and emotions.

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Only when your mindset is adjusted properly and you can achieve the unity of knowledge and action, does cognition have value.

As for why there is 1% luck, it is the key to how much you can earn.The lower limit of the investment market relies on cognition and mentality.

The upper limit of the investment market is inevitably associated with luck to some extent.

Only those who grasp luck can make a lot of money, which is unrelated to cognition, because the development of anything in the future is full of variables, and investment requires luck.

So for retail investors, how should they approach cognition and mentality if they want to make money from stock trading?

1. Firmly avoid what you don't understand.

What is the realization of cognition?

It is to do things that you can understand, rather than doing things that you feel inexplicable and take a chance on.

In fact, many retail investors have found that there are some transactions of buying and selling that seem problematic afterwards.

Especially for some stocks, they got on the bus without even understanding them.Since it is a manifestation of cognition, then places that the boundaries of cognition cannot reach should be resolutely avoided.

There are more than 5,000 listed companies in this market; even if one can only understand one of them, it is still possible to make money.

Why swim in one's blind spot, hoping to make money by luck?

2. Mistakes in stocks should be summarized.

In fact, there are no saints in the stock market, only experts.

Experts do not make money every time, but the number of times they make money is far greater than the number of times they lose money.

Experts are not born so formidable, but they have gone through trials and summarized many rules.

Making mistakes in stocks is a common occurrence; the question is what you can learn from the mistakes?

What you get is not only the loss on the books, but also a lot of valuable experience.

Falling into a pit is not necessarily a bad thing; it is a bad thing if you can't remember it.Although it's difficult to find identical stock trends, there are plenty of similar patterns to replicate.

When you face the same problem again, the key is whether you can skillfully avoid these pitfalls that lead to losses.

As the probability of losing money decreases, does the probability of making money increase?

3. Strictly adhere to valuation rules.

In the stock market, individual stocks can deviate from valuation rules, but the entire market cannot.

Stocks themselves are bought low and sold high. The "low" and "high" here correspond not to price, but to valuation.

Buying in the low valuation area and selling in the high valuation area is the foundation of investment.

However, this rule is a general rule, not a specific one.

General rules are for patient people to make big money, not for predicting short-term market trends.

Strictly adhering to valuation rules is one of the most stable ways for ordinary retail investors to make money.It's as if everyone should understand that the decline of an index is increasingly safe the more it falls, while an increase is where the risk becomes higher and higher.

4. Do not go against the trend.

In the cognition of investment, the most important point is actually about the trend.

The trend is that whatever others do, you should do the same, and do not go against or defy it.

For example, artificial intelligence is a major trend, and stocks in this field will be stronger than those of other less favorable trends.

The foundation of the trend is logic, it is the logic of the industry, the logic of the listed companies, and also the logic of capital.

The essence of stock trading is the buying and selling of capital, it is the supply and demand of the market, and it is the realization of the trend.

All stock increases can be explained as trend-based, and in the face of the trend, everything else is secondary.

5. Avoid emotional trading.

If the previous days were about cognition, then what follows is about the mindset.The most important aspect of mindset is to avoid emotional trading. Do not make trades that were not originally planned just because of short-term market fluctuations.

Emotionalization itself is a manifestation of mindset.

Sudden rises and falls can easily change an investor's three views (worldview, life view, and value view).

But if you are emotionally stable, you will find that sudden rises and falls are actually part of the plan. Once they occur, there should be a basis and standards for making decisions.

The more peaceful the mindset, the more accurate the prediction of sudden rises and falls, which can help oneself make better decisions.

6. Strictly implement the established strategy.

Execution itself is the combination of cognition and mindset.

At a certain point in time, why can't we effectively execute our own trading decisions?

The reason is that your emotions have brought about changes in your mindset.

When it's time to sell, you always hope to make a little more profit, thinking about waiting a little longer and looking again.The result may be getting longer and higher, but the high probability is that you've taken the elevator.

Because once it goes up, you'll still want it to go higher, and there will never be a time to stop, and the result will be to fall down.

Only by strictly executing your trading strategy and not holding on to any fluke mentality can you know whether your strategy is right or wrong, and whether it is effective.

When a stable trading strategy is formed, it is not far from making money.

7. Know how to maintain rest and recuperation.

Rest and recuperation is very important.

It is not necessary to swim in the trading market every day, as long as you can keep a calm attitude.

We all want to make money, but making money in the stock market cannot happen every day.

There must be a stage where the probability of losing money is higher than the probability of making money, which means the risk is higher.

At this stage, you must know how to rest, rather than frequently trading.The more you do, the more mistakes you make is a major characteristic in the stock market, because humans are not machines; the more decisions you make, the higher the error rate will be.

Reduce the number of times you make moves, and increase the quality of each move. When it's time to rest, you should know how to rest.

8. Understand how to control the level of your position.

The essence of controlling your position is actually a matter of mindset.

The position determines the mindset, this statement is correct.

But the mindset also determines the position, this statement is correct as well.

The two are actually complementary to each other.

Everyone wants to make money, the higher the position, the faster the money is made, but the risk is also greater.

If your mindset is very anxious, then the position must be heavy. Only when the mindset is stable will you understand the importance of the position, and then you will know to diversify, to control the position.

On one side is the opportunity to make money, and on the other side is the control of risk. How to balance, what you actually look at is the mindset.Level your mindset, reduce the game-playing, and you will naturally be able to control your positions well.

How to effectively enhance cognition and adjust one's mindset is key in investing.

Many things are easy to say but hard to do, simply because one is in the midst of the situation and cannot see the whole picture.