Trading Concept Primer (6): Goal Management and Benchmark

The Trading Concepts Compendium series aims to share some "rarely mentioned but extremely important" trading concepts. I believe that regardless of whether you are a newbie or a Crypto Veteran, you can take away something from this series of articles. There are a total of 10 articles in this series, and this is the 6th one. (Previous summary: Trading Concepts Compendium (5): How the Visualized Taker Intensity Indicator CVD Helps You Identify Direction) (Background supplement: Trading Concepts Compendium (4): How to Analyze Taker and Maker Orders to Follow Market Makers in Entering the Market?) The Concept of Beta In simple terms, Beta represents "market returns." In the U.S. stock market, it is usually based on the S&P 500 index as Beta. If a strategy has: Beta = 1, it means that if the market rises (falls) by 1%, the strategy also rises (falls) by 1%. Beta = 2 means that if the market rises (falls) by 1%, the strategy will rise (fall) by 2%. Beta < 0 means that the strategy itself moves in the opposite direction of the market, often being a hedging asset/strategy. Do proper goal management and don't just waste time. Many people may not know that Buffett's average annualized performance is only about 20%. Why is he called the "Oracle of Omaha"? There are two core reasons: He has consistently outperformed Beta (the S&P average annualized return is about 10%) and has steadily generated this return, rather than relying on a one-time windfall (not just luck). It's important to note that most people lose money in the financial markets. While everyone dreams of becoming the Oracle of Omaha, they ultimately become fodder. Therefore, whether in designing trading strategies or drafting trading plans, we must ask ourselves, "What is the goal?" The Concept of Benchmark Some might say, "The goal is to make money." Great, then the next question is, "How much money do you want to make?" In the world of crypto, there is a rather distorted value perspective: most people scoff at "10% a year" and are completely dismissive. Just look at the number of altcoin devotees to understand this. Not to mention the S&P 500, most retail investors even find holding BTC too slow, right? In the crypto market, BTC is typically seen as the benchmark for this market, and you can ask yourself: How many people will waste a whole year in 2024, yet underperform simply holding BTC? Let me give another example: If BTC is used as the benchmark, from the high point on 1/20 this year to the publication date (4/15), the maximum drop was about 32%. During this period, as long as your loss < 32%, you have already beaten the benchmark. Therefore, the key point is: When the market is booming, even pigs can fly; at this time, you should ensure that your returns are at least = beta; once the market worsens, timely switching to a defensive mode is also a strategy, and "not operating, reducing position, or Short Position" are all forms of strategy. We cannot catch every swing trading opportunity, but we should at least aim not to underperform beta. Summary In summary: Beta = the concept of market returns, often used as a Benchmark. Buffett excels in "compound interest + steadily creating returns," rather than a single windfall. Carefully consider your "goal management" before drafting your trading strategy. Beta is the easiest return to achieve; in operation, you should at least not lose out to Beta. It's interesting to note that in the crypto market, with performance spikes of 5000% or 300 times, many people look down on a 10% annual strategy, all dreaming of becoming the protagonists in wealth creation myths, but ultimately becoming part of the countless corpses in the bloody financial market. If you want to achieve stable profits in the market, be sure to consider the issue of goal management; if you're just here to gamble and chase after windfalls, then you can ignore what I've said. Finally, I'll conclude with a screenshot from when I was developing quantitative strategies. In strategy development, the benchmark, besides being beta, can also be the strategy itself. That's all for Trading Concepts Compendium (6). I hope this is helpful to everyone, and thank you for reading this far. Original link: Related Reports Interpretation of six current situations in the Web3 AI track: Compared to AI Agents, institutions pay more attention to infrastructure. AI Agents merge with Web3, and the era of Bots helping you with on-chain finance is coming? Complete introduction to Mind Network: Using FHE technology to crack the security issues of AI Agents <Trading Concepts Compendium (6): Goal Management and Benchmark> This article was first published on BlockTempo, the most influential blockchain news media.