Concepts》Bull Market: The Unchanging Standard for Making Money: Build Your Own Trading System First

In the financial markets, it is crucial for investors to build a trading system that suits them. As the market changes, intuition alone can no longer guarantee stable profits. This article will explore the methods and evaluation indicators for designing effective trading systems to help investors find a foothold in complex markets. This article is from an article written by 4Alpha Research and compiled by PANews. Why is Nansen CEO optimistic about becoming the largest Bull Market in history in 2025? Five-point Favourable Information: Trump wins, SEC chairman changes, Fed rate cuts... (Background added: Doubt encryptionBull Market anymore?) Five key data have been greenlighted) There is no stable profit trading system The trading system is actually a trap operating system, placed in the computer, which can be understood as a complete human-computer interaction system, through which people make the computer work; Understood in a biological sense, it is similar to conditioning, that is, "when a signal A appears, there must be an action B". The trading system is a trap about get on board, exit, stop loss of buying and selling, the sum of complete signal rules for take profit There are many misunderstandings about the trading system. Some people believe that the reason why they cannot make a profit is because they lack their own trading system, and once they have it, they can make a profit. Others believe that the reason for the failure to obtain excess returns is that their existing trading system is not good enough, so they need to find a better system. There are also those who firmly believe that there is a magical trading system in the world, and as long as it is operated according to it, it can make a steady profit. Are these views true and credible? First of all, it needs to be clear that there is no "perpetual motion machine" or "elixir of life" in the world, and naturally there will be no one-size-fits-all trading system that is always stable and profitable. If such a system existed, smart people would have discovered it and exploited it long ago. Secondly, even having a good trading system does not mean that you can achieve stable profitability. A good trading system first requires users to have strong execution and be able to follow their instructions 100%. Also, a good trading system is not necessarily suitable for everyone. Everyone needs to find a trading system that suits them, and this cannot be measured by standardized "good" or "bad". In order to find a trading system that suits you, you first need to correctly understand and position the role of the trading system. The trading system is similar to military guidelines. Exactly following these guidelines may not guarantee victory in every battle, but at least it will ensure that there will be no crushing defeat and leave a chance to follow. The trading system is at the strategic level, while the combination of "operational thinking" and "operational strategy" belongs to the campaign level, and the specific trading action is the performance of the tactical level. By correctly understanding the role and limitations of the trading system, and finding the right system based on its own characteristics, we can achieve better results in trading. So how to evaluate a trap operating system? When evaluating a trading system, I think there is only one core key metric to follow, the "profit and loss ratio". The so-called profit-loss ratio refers to the average amount of profit divided by the average amount of loss. For example, you invest 1 million yuan and trade 10 times according to a certain trap operating system, of which 4 times are profitable, making profits of 150,000 yuan, 250,000 yuan, 350,000 yuan and 450,000 yuan respectively; 6 losses, losses of 100,000 yuan, 150,000 yuan, 100,000 yuan, 50,000 yuan, 70,000 yuan and 200,000 yuan, respectively. At this time, the average profit when making a profit is 300,000 yuan, the average loss when losing is 111,700 yuan, and the profit-loss ratio is 30/11.17 ≈ 2.69. If you use this trading system for continuous trading, whether it is 100 or 1000 times, according to the profit and loss ratio of 2.69, it is theoretically possible to achieve profit. A profit and loss ratio below 1 indicates a loss. However, when evaluating objectively, we need to consider certain redundancy factors. Personally, I believe that the profit-loss ratio should not be lower than 2 in any case. Specifically: A P&L ratio of 3 can be considered a passing grade, i.e. 70 points A P/L ratio of 4 can be considered good, i.e. 80 points A P/L ratio of 5 can be considered excellent, i.e. 90 points A trading system with a P/L ratio above 5 can be considered a perfect score It should be noted that trading systems with a P/L ratio above 5 are very rare. It is recommended that you measure the profit-loss ratio of the trading system (or buying and selling rules) that you have been adhering to for a long time in order to better evaluate its effectiveness. What elements need to be included in designing an operating system Before building an operating system, we should first ask ourselves, what is the purpose of making an investment? Got rich overnight? Is it a steady increase in value? Or add value quickly? Moreover, What is the expected rate of return? Is it 100% a year? Is January 100%? Is it 30% a year? Is January 30%? Is it 200% a year? Or 50% a year? These problems will greatly affect how we design our own operating system. Also, what is our tolerance and risk appetite for risk? Can tolerate a large drawdown of more than 30%? Can tolerate small drawdowns within 20%? Can only tolerate a slight drawdown within 5%? Or is any drawdown completely intolerable? These several questions about risk must also be considered. Without figuring out these issues, there is little point in blindly building an operating system, at least not for yourself. A complete operating system should contain the following seven elements: Cycle judgment: understand the general trend of the market and judge the current market cycle (such as Bull Market, Bear Market, Shock Market, etc.) Operation thinking: clarify the basic concept and strategy of operation, whether to pursue short term fast forward and fast out, or long-term holding Coin selection: select potential stocks according to certain criteria and methods Timing selection: determine the best time to buy and sell Buying and selling rules: develop a clear buying and selling strategy, including entry and exit conditions Fund management: reasonable allocation of funds, avoid excessive concentration or dispersion, and ensure the efficiency and safety of fund use Risk control: Develop risk management strategies, including stop loss mechanism, position control, etc., to control and drop investment risks. By comprehensively considering and integrating the above elements, you can build an operating system that suits you, so as to achieve your investment goals more effectively. Let's look at it in detail. Cycle judgment Following the trend is the first meaning of investment. When the broader market rally is in full swing, the success rate of our various strategies, currency selection and timing capabilities will increase significantly. Even if the strategy and timing ability are not perfect, it is possible to make money from the rise of swing trading in an environment of rising markets. And if it is judged that the market is rising steadily, Holdings psychology will be more stable, and even dare to buy at the low, so as to drop the cost of holding coins and obtain maximum profits. On the contrary, if there is no clear judgment on the trend of the broader market, the psychology of holdings will be turbulent, and it is easy to overreact due to small fluctuations, resulting in operational deformation. Moreover, the judgment of the cycle will provide an important reference for subsequent operations, and all buying and selling operations in Bull Market should be Heavy Position and concentrated; All buying and selling operations in the Bear Market should be light positioned and decentralized. Operation thinking Operation thinking can also be called the operation strategy under different market conditions, but this operation thinking can only be determined on the basis of the judgment of the market, so the accuracy still depends on the ability to judge the market. Operational thinking is like a plan to fight a battle, how long to fight, how large the battlefield is, these must be set in advance. It is not possible to revise the battle plan, increase the number of troops at will, and change the direction of the operation at will. Especially in the Bull Market, the importance of coin selection is even more prominent. If you want to get excess returns, you must carefully choose the currency you hold, and you should try to avoid frequency in the Bull Market.