Building a Personalized Trading System: The Key to Enhancing Investment Efficiency

The trading system is essentially a set of operational rules, similar to a human-computer interaction system or a reflex mechanism. It includes complete signal rules for entry, exit, stop-loss, and take-profit.

There are some misconceptions about trading systems. Some people believe that simply having a trading system guarantees profits, or that a better system can lead to excess returns. Others believe in the existence of a magical system that always guarantees profits without losses. However, these ideas do not align with reality.

In fact, there is no trading system in the world that can guarantee stable profits forever. Even with an excellent system, strong execution is required to achieve consistent profitability. Moreover, the system that suits each person is not the same.

To find a trading system that suits you, the first step is to correctly understand its purpose. A trading system is similar to military guiding principles; following it does not guarantee victory in every battle, but it can prevent catastrophic losses and preserve future opportunities. It operates at a strategic level, while specific operations belong to the tactical level.

When evaluating a trading system, a key indicator is the "profit-loss ratio". The profit-loss ratio is the average profit amount divided by the average loss amount. Ideally, the profit-loss ratio should not be less than 2. A profit-loss ratio of 3 can be considered passing, 4 is good, 5 is excellent, and above 5 is a perfect score. It is recommended to calculate the profit-loss ratio of the trading system you have been using long-term to assess its effectiveness.

Before designing a trading system, it is necessary to clearly define investment objectives and risk tolerance. A complete system should include seven elements: cycle judgment, operational thinking, coin selection, timing, buying and selling rules, capital management, and risk control.

1. Cycle Assessment: Understand the market trend and determine the current cycle. This is the foundation for following the trend.

2. Operational Thinking: Determine basic operational concepts and strategies.

3. Selecting coins: Especially important in a bull market, it is necessary to select specific coins and avoid frequently changing coins.

4. Timing: Determine the best buying and selling opportunities.

5. Trading Rules: Establish clear entry and exit conditions while maintaining a certain level of flexibility.

6. Capital Management: Allocate funds reasonably and consider the use of leverage.

7. Risk Control: Develop risk management strategies, such as stop-loss mechanisms.

The trading system provides clear signals, making trading more standardized. Even a simple system can avoid arbitrary trading. For ordinary traders, the key lies in the efficiency of the system, rather than its complexity.

Taking the Granville's Eight Methods as an example, it provides buy and sell signals based on moving averages. The core idea is: buy when the average line is rising, sell when it is falling; the best time to buy is when the average line turns from falling to rising and the price breaks through; the important time to sell is when the average line turns from rising to falling and the price breaks down.

Building a personalized trading system and strictly executing it is key to improving investment efficiency. It can help investors maintain rationality in different market conditions and achieve long-term stable returns.