Most people think that building a trading system is a simple process, but it is not. The framework of the system itself is not complicated, but to truly use it and continuously evolve it is a difficult and challenging process.
A trading system is like a sophisticated logical chain. For those who just stare at the market and make decisions based on their emotions or intuition at any time, their trading process is often chaotic. Today, when the market breaks through a technical level, they want to go long; tomorrow, when they see the price pullback, they want to go short. All decisions are based on momentary emotions and positions, which are often driven by self-bias and interests.
Most people tend to look for reasons to sell when they feel the price is too high, even if those reasons lack substantial basis. Even if the market does not provide strong signals, inner anxiety and fear may prompt them to make decisions. Furthermore, many traders do not realize the impact of such psychological suggestions. The data shown on the charts only reflect past information, but an excessive focus on short-term fluctuations and minor patterns often traps us in a narrow perspective, overlooking the true opportunities in the larger trends.
Therefore, many people believe that establishing a trading system is a rational and objective way of thinking, but in reality, they have merely found reasons that align with their thoughts, piecing together a chaotic array of information into 'evidence.' This self-suggestion leads them to repeatedly make mistakes in the face of failure.
To truly establish and adhere to a trading system, the most important factor is not the system itself, but how to manage oneself. Knowing the principles of the system does not equate to being able to execute it. It is like someone who knows they should go to bed early and rise early, yet finds it difficult to do so. To execute a rule, one must have sufficient self-discipline and cognitive depth. Otherwise, the established system is merely an empty theory, lacking practical execution capability.
In my view, a trading system is a dual extension of personality and cognition. Some people are naturally optimistic and action-oriented, making them suitable for swing trading and short-term operations; while others are inherently steady and inclined to think things through, making them better suited for medium to long-term positions. After determining our personality traits, we should choose a trading type that suits our strengths and then summarize a core strategy that aligns with our style.
A successful trading system is not just a collection of cold rules; it is a process that integrates personal characteristics, risk tolerance, and market understanding through continuous practice and reflection. This process is not achieved overnight, but is a journey of accumulating experience through trial and error and adjustments in practice.
For example, a trader skilled in swing trading may not need to execute trades every day. Their system incorporates filtering mechanisms to avoid impulsive decisions driven by short-term fluctuations; meanwhile, a trader focused on trends will concentrate on larger market movements, slow down their trading pace, and avoid frequent trading impulses.
Through these mechanisms, we gradually eliminate the blind pursuit of frequent trading impulses, and become more rational in responding to each signal, developing our own judgment and coping abilities. The execution of a trading system does not mean being mechanical, but rather maintaining calm and acting according to rules in a complex market environment.
Similarly, position management and risk control are indispensable parts of a trading system. They help us avoid losing control in the face of intense market fluctuations, maintain rationality, and maximize our profits. Many people often greedily increase their positions after making a certain profit, neglecting the potential risks in the market, leading to final losses that far exceed expectations. This occurs because they fail to timely adjust their position structure in the face of gains and losses, instead continuously increasing their bets.
Therefore, an excellent trading system is, in fact, the sublimation of experience and cognition. It is not fixed but gradually optimized and perfected with the accumulation of market conditions and personal experiences. When we can truly adhere to this system, market volatility will no longer be a source of fear but will become a tool for us to seize opportunities.
Ultimately, the true value of a trading system lies not in maximizing profits on every trade, but in helping us control risk and maintain a stable mindset. It is a way of combining theory and practice, integrating market insights with self-awareness, and this combination can only be gradually understood and formed through the tempering of time and the accumulation of experience.
