Correct reinvestment
The younger generations tend to have abundant knowledge and information and seem to think about things rationally, but they also tend to overemphasize “calculation,” often ending their research with just an online search, and they pepper the conversation with words like “cost performance” (cost effectiveness). The idea that getting a girlfriend isn’t cost-effective… this is a feeling I absolutely cannot understand. I believe the proper instinct for young males is to charge ahead with “I want a girlfriend!” and “I want to flirt!” driven by instinct and emotion.
Because information about trading is rich in numbers, it tends to skew toward “calculation,” but I think it is essential to consider the influence of emotions and be aware of the living human being. In fact, there are cases where one thinks one has calculated properly, but in reality the human element is completely exposed; organizing information in this area is important, isn’t it?
A higher utilization of funds leads to greater efficiency──。
Since you are using strategies that are likely to be profitable, it’s a natural way of thinking.
However, for example, calculating “funds increased by 10% and position size increased by 10% immediately” feels more fussy than precise.
Trading inevitably involves winning and losing.
If, over a certain period, the fund increases by 10% as a result of wins and losses, theoretically it wouldn’t be wrong to increase the position size by 10% at that stage; however, when the wave of “wins” is followed by a wave of “losses,” you must anticipate the coming of a loss.
Suppose you repeatedly “win 10% and lose 10%,” and you increase the trading size by 10% at the point you win 10%—what would happen?
With 1,000,000 yen in funds, if you win 10%, funds become 1,100,000 yen. Then if you increase the trading size by 10% and lose 10%, the second loss is 110,000 yen. In other words, funds change as follows, creating a cycle that decreases funds the more you trade: 1,000,000 yen → 1,100,000 yen → 990,000 yen
1,000,000 yen → 1,100,000 yen → 990,000 yen
The notion of “increase funds by 10% and increase trade size by 10%” is dismissed as a pseudo-logic, but this explanation itself is a kind of pseudo-logic.
Wouldn’t a more practical way of thinking focus on real, living humans who cannot remain calculating to the end?
It is a problem whether a 10% or 20% increase or decrease can be evaluated as a complete “actual result.”
Depending on the number of securities handled, stock prices can move significantly in the short term, so some may view 10% or 20% as just a margin of error.
Therefore, the idea that you should not bother with small reinvestments and should focus more on each individual trade holds as well. The key is to stay in the market without large losses, seize opportunities to win, and think big about growing your assets.
In “New Edition: Chugen Sen Tateitamae (Chugen Line Build-Up Method)” Part II, the text explicitly states regulations about capital amount and position size. I quote below.
Total capital amount should be prepared at twice the amount, with a margin that capital utilization does not exceed 50% and leaves room for flexibility
（omitted）
Until the total capital amount becomes at least 1.5 times the initial amount, you should maintain the traditional unit of positions; once it reaches 1.5 times, you should increase the position unit by 1.5 times accordingly.
If there is a fractional unit in the position unit at this time, truncate it. (Align to the lower side)
And the next increase in the position unit should occur only after it becomes double.
From then on, this ratio should be followed.
The original text of the Chugen Line (old fragmentary material) reportedly said, “Do not change the position amount until it becomes double.” That is how patient and gentle one must be in approaching trading, a practical insistence by practitioners that handling trading worries, confusion, and suffering properly is the absolute condition. Please pause for a moment and listen.
