I have always been interested in trading systems, and if you want to survive in the stock market, you must have a set of trading systems that are suitable for you. And one of the questions I have been thinking about is: how to build a trading system? learn from others? make it yourself? I feel that it is not very reliable, and my own years of experience have confirmed this.
In trading circles, you often hear similar feelings: "I don't have my own trading system, or I have a great trading system, but I can't control myself, I can't follow the discipline and always stick to it". "I can't make money, I can't lose money, I can't even make a trade, all the misfortunes in trading, it seems, can be blamed on the lack of my own trading system, I can't stick to my own trading system".
In fact, if you look closely at people's trading behaviour, you will see the opposite: in fact, every trader has his own trading system; each trader adheres to his trading system with astonishing tenacity; and this trading system does not come out of the blue, but is rooted in each trader's gut instinct.
For example, a person who is caught in a transaction is usually caught in a pattern of habit; different scenarios can occur, but the result is always caught; and more importantly, the psychological mechanisms that lead to the person being caught are always the same; other mistakes, such as: missing opportunities, tearing eyes at the prospect of the transaction going away in the direction he anticipated, but always not pulling the trigger; excessive trading, high risk, or high frequency of trading, etc. A trader who makes a mistake tends to repeat the same mistake over and over again.
In this regard, the description of Yang, a stockbroker, in his memoirs, is very telling:
"When you associate certain mistakes with failure, you don't want a second time. But I'll tell you something strange: stock speculators sometimes know they're making a mistake and still make a mistake. After making a mistake, they ask themselves why they're making a mistake, and after the pain of punishment is over, and after a long period of calm thinking, they may know how they made a mistake, and they may know when they made a mistake in that particular part of the transaction, but they don't know why they made a mistake".
Of course, if a person is both smart and lucky, he will not make the same mistake twice. But he will make the same mistake twice. He will make the same mistake twice. He will make the same mistake twice.
This is an excerpt from the memoir, Chapter 10, by a stockbroker.
There are hundreds of thousands of brothers or cousins who are essentially one mistake, only slightly different in appearance.
1. Every trader who makes a mistake has his own trading system. Although the trader himself is not aware of it, let alone clearly expresses it, the trading system must be extremely clear, otherwise it is impossible to repeatedly and accurately replicate the results of the manipulation.
2) When it comes to the execution of trading systems, these traders are very disciplined and always stick to the same set, stick to missed opportunities, stick to over-trading...
3. This trading system is not a "designed" one, it is naturally rooted in the seller's inner selves.
These three things are the very characteristics of system trading, the dream of every system trader!
Therefore, it is possible to call such a trading system a real trading system, but people are not used to saying this. The corresponding one is a trading system in the form of a chip, or a chip designed by a chip.
Like the alchemists of the time, generations of traders have been searching desperately for highly efficient trading systems in the hope of improving trading performance. This kind of treasure hunting work, which was done with paper and pen a century ago, is now done with computers.
The practical results of this kind of scavenger hunt are mostly not ideal. The real difficulty in building a trading system is not to find an efficient system, but to implement a system that has already been found in a real trading environment. In other words, the key is to be disciplined.
So, is it possible to force yourself to be disciplined and to implement a tested and proven trading system with willpower?
...traditions represent ideas, desires and feelings of the past; they are products of interracial cooperation and have a great influence on us.
... many politicians, still less intelligent than the intellectuals of the last century, believe that the only way forward for society is to break with its past and follow the light of reason.
... people are dominated by tradition, and even more so when they form groups. They can easily give the changes that tradition causes, as I have repeatedly pointed out, only some names and external forms.
... Progress is impossible without destroying these traditions.
... if a nation makes its customs too strong, it will not change, and thus, like China, will not be able to improve. In this case, violent revolution is of little use, because the result is either that the broken chains are reassembled and the whole past is re-enacted, or...
At the end of the last century, when the church was destroyed, the monks were either exiled or killed, one might think that the old religious ideas of the day had lost their power. But within a few years, in order to comply with the general demands, the banned public worship system was reestablished, the old traditions that had been temporarily destroyed were restored and the old influences were restored.
The most unsuspected idols, not the ones who live above the bathrooms, nor the most authoritarian tyrants in the palace, can be shattered in an instant. The ego that rules our deepest selves, the invisible masters, can safely avoid all rebellion,...
Chapter 2 of The Crowd of Owl
The same is true of nations and individuals. Applying Le Pen's words to trading: many system traders are still less intelligent than their counterparts of the last century, and they believe that relying on a mechanical trading system is the only way to break with their past and move forward fully guided by the light of reason.
In fact, for many traders, the changes brought about by mechanical trading systems are often only a few words and external forms. The actual behavior of the trader is still controlled by his/her own real trading system. In this case, the coercion of the will is of little use, and the broken chains are reassembled so that the whole past is unabated. The most unquestioned authority, not living in the computer program, nor the will of the trader, can be shattered between turns.
It is true that a trader can exercise self-control for a period of time to maintain discipline and avoid making the same mistakes that he has made. However, if you look closely at his/her life, it is not difficult to see that during this period, although he/she is no longer caught up in trading, no longer misses opportunities, no longer over-trades... but in other areas of life, he/she becomes more and more caught up, missed opportunities, over-trades... The price they pay for these mistakes is not diminished, but on the contrary, is often worse.
A fallacious trader is never limited to trading or some other specific area of life, but rather it permeates the whole lifestyle of a person. It is never just a different scenario, the basic pattern is always the same. The plot is always the same, the psychological feeling is always the same. A trapped trader will be trapped in his career choice, and will be trapped in his marriage. A trader who misses a chance will also miss a chance in his career choice, and will also miss a chance in his marriage.
A man who has no courage in his life to follow the trend, who has no confidence in his life to rely on his own random impulses, you cannot expect him to turn in his trading to follow the trend; a man who likes to control others, to control the situation in his life, you cannot expect him to trade without trying to control the market, without trying to prove that he is smarter than others; a man who does not accept losses in his life, you cannot expect him to accept losses in his trading openly; a man who suffers from losses in his life, you cannot expect him not to care about money in his trading; a man who cannot live in harmony with life and change in his life, you cannot expect him to trade in a way that is intimate with the market and without spies...
The so-called "real" trading system is in fact a natural manifestation of a person's unique lifestyle, unique behavior patterns in the field of trading. The so-called "trading system" is the harmonization between the trading system and the lifestyle. The design and testing of the trading system, if the trader himself is ignored, is incomplete and has no practical meaning.
(Source: Mechanized Programmed Trading Forum)