Having a trading system is still one step away from making a profit, which is consistent execution. Most people cannot achieve consistent execution because human nature is difficult to overcome. Human nature pursues perfection and will always intervene and optimize.
Only if you execute your trading system consistently can you unleash its power. Of course, the premise is that your trading system has positive profit expectations. If your trading system has negative expectations, then no matter how long you execute it, it will be useless and the final result will still be a loss. For example, the Martingale grid may make you a little money in the short term, but it will inevitably result in losses in the long run.
1. What should a positive expectation trading system look like?
A positive expectation trading system needs to meet two core requirements: cutting losses and letting profits run.
As long as your trading system meets these two conditions and you can execute it consistently, you can achieve positive returns. It's that simple.
There is only one way to achieve stable profits, and that is to lose less when you lose and earn more when you make money.
The specific approach is to cut losses and let profits run. To let profits run, you can only embrace trends. Trends are not common, but they will always appear because the market always fluctuates. If the market loses its volatility, it will lose its meaning of existence.
The purpose of a trading system is to ensure that your trading logic can be output stably. Whether you can make stable profits depends on your trading logic.
A trading logic with positive return expectations must achieve profits in trends large and small, and strictly control risks when losing money.
2. What suits you is the best.
Everyone has different risk preferences and different personality traits, so you need to create your own trading system.
A trading system is generally divided into three parts: an entry condition for trial and error, an exit condition for cutting losses and letting profits run, plus a money management condition that suits one's own risk preferences.
A trading system that suits you is one that polishes every detail within these three parts to make it operate smoothly and without being humble or overbearing. You should build your own trading sword based on your personality traits.
It is best to design a trading system that suits you based on your personality traits and risk preferences, which has positive return expectations in the long run. Only when it suits you can you insist on consistent execution.
The execution stage is often the most difficult stage for many experienced traders. This is why many people have been trading for several years and understand many principles, but are still not good at trading. Because in the actual trading process, facing the ups and downs of the market, many people are unable to overcome their own weaknesses in life and often give up their trading plans, which ultimately leads to failure and exit.
3. There is no one-time trading system, only a one-time trading logic.
Many people want a trading system that works once and for all, which is actually the pursuit of the Holy Grail of trading. People with some trading experience know that there is no Holy Grail of trading in this market. If you want to work once and for all, you just want to win easily. Many people start to concentrate on research as soon as they enter the trading market, trying to find a set of Holy Grails of trading and turn it into their own ATM.
There is no trading system that works once and for all, because no matter how top-notch your trading system is, it will always have its expiration date. Just like if your trading system is trend-following and encounters a volatile market, no matter how top-notch it is, you will still lose money. Some people say that their system can both catch trends and do volatility, which is obviously nonsense, because no one can predict in advance whether the future trend will be a trend or a volatility.
No matter how your trading system is implemented, as long as the underlying logic of your trading system is in line with "cut losses and let profits run", then your trading system will have positive returns in the long run. Theoretically, it is not impossible for you to use this trading system for a lifetime.
Jesse Livermore once said that speculation is as old as the mountains and there is nothing new on Wall Street. This means that human nature never changes. The trading principles in the world of speculative trading have long been determined. All we have to do is discover and recognize them, and then firmly implement them. We don’t need to create them.
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