Therefore, we need a standard to judge whether the trading system is available, so as to avoid most traps, find a real trading system and achieve stable profits.
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There are two criteria for judging.
First, intuitively, a trading system should be a complete closed loop, and there should be no missing links.
Since it is called trading system, with the word "system" in the middle, it means that it is not only a link, but at least it should include opening signal, stop loss signal, take profit signal, position management, and can also add opening and lightening signals to form a complete closed loop. If there is any signal in the market, you can enter the warehouse; When preparing to enter the warehouse, you should know how big the position is; After entering the warehouse, stop loss when you prove that your judgment is wrong or abnormal; With the floating surplus, you must know when you can leave; After leaving the site to complete a cycle, you can wait patiently for the next warehousing signal, thus entering the next cycle and forming a closed loop. Of course, the signals of increasing and decreasing positions are addition, which can improve the details of the trading system.
Figure: Closed cycle of trading system
If there is a link missing, such as no stop loss signal matching the warehousing signal, and you don't know when to leave the warehouse after warehousing, and you can't form a closed loop, then once you make a mistake, you will fall into a huge loss and become nothing. What is the significance of this warehousing success rate?
In reality, this situation is very common. People will often meet people who call to place an order and only tell you to enter the market, not to tell you when to stop. If the middle price drops sharply, but the market finally picks up, he will say "listen to me, yes, you earned it"; However, the market did not rise back, but fell a lot. If you lost a lot, he was silent. When you ask him what to do, he will say, "I left early. Didn't you leave early?"
This operation is meaningless. God knows what his actual operation is like. Maybe he left before the price went up, or maybe the price dropped a lot and he was still here.
Similarly, if there is no take profit signal, when you leave after floating profit, it is a matter of feeling completely, and you can't form a closed loop, which will seriously affect your profit-loss ratio. For example, if you run with a little profit, you will miss the big profit behind, resulting in a small profit that can't make up for the stop loss, or you will lose money; Or, if you don't run after the floating profit, the market will fall and the profit will be recovered, or stop the loss, and the floating profit will become a floating loss. Then this kind of signal that does not match the take profit signal is meaningless even if the original signal succeeds, because it is still unprofitable.
Most trading books just tell you about the signal of opening positions, repeat it, and then find many special examples to illustrate how successful his signal of opening positions is, but in fact this is a false proposition, which cannot prove whether his signal of opening positions is successful or not, because the stop-loss signal and the take-profit signal do not match, and you have no idea where you will leave in that market. How do we know if this inbound signal is successful?
Most books or people blur their eyes, which is deceptive. Most retail investors without senior experience are really easy to be deceived. For example, a market has gone up, but there are many retreats in the middle. If his departure signal is clear, so many retreats are likely to make him leave or stop early, but because of the ambiguity of leaving, all we can see is: from him. As shown in the figure below:
Figure: Without matching stop-loss and take-profit signals, we are easily deceived.
Of course, because most people who write books can't make profits themselves, if they make clear their stop-loss signals and stop-profit signals, then the profitability of his trading system can be easily tested. When everyone tests that his trading system is difficult to make a profit, he is easily exposed, so in order to prevent being exposed, he consciously does not talk about leaving the market, so that the audience will never know the profitability of his trading system, which can neither be confirmed nor falsified. We were blinded by the unknown truth, which enhanced his personal status and made him cheat everywhere forever.
Without the cooperation of stop loss signal and take profit signal, the success of a certain opening signal is meaningless, and the success rate of opening signal is meaningless. The success rate is not only related to your opening signal, but also related to your stop-loss signal, and the stop loss at the point is large. In some other cases, the success rate of warehousing will be high, on the contrary, the success rate will be low; This will also be related to your take profit signal. If your take profit signal is to make a profit, the success rate will be higher. On the contrary, the success rate will be lower.
Therefore, if there are no stop-loss signals, take-profit signals and position management signals that match the warehousing signals, then this trading system cannot form a closed loop and cannot be used in actual combat. This kind of trading idea is meaningless and can't be proved or falsified. It cannot be used to double-blind test the profitability, profit-loss ratio and success rate of the system.
Second: The key is that it can be verified, falsified and proved to be able to stabilize profits.
Trading theory is not a religion, not used to worship and improve the cultivation of the soul, but actually used for profit, and it can't be anything empty. Personal transaction theory is regarded as a religion. For example, some people question a trading theory and they can't refute it. Once they have doubts, they are immediately beaten and abused by everyone. They don't talk about science, but they have to talk about their beliefs and political positions. This can't be done.
Religion cannot be proved or falsified, but it doesn't matter. Religion is used to improve the spiritual realm, not for profit, so religion needs neither proof nor falsification, as long as it can comfort a person's soul.
When a trading rule has a chain of warehousing, stop loss, take profit and position management, and can form a closed loop, then this trading rule can be called a trading system, which is the premise for the trading system to be available. However, closed-loop trading systems may not be profitable. Most trading systems do not meet the profitability conditions, but they can be used to test whether they can be profitable.
Since the trading system is used for profit, it must be able to prove and falsify, otherwise its profitability is uncertain and random. Who knows if you can make a profit, then you will lose in actual combat.
If the transaction wants to make a stable profit, its logic must be scientific, so it must be able to prove whether it can make a profit. That's all that matters. Whether it is a horse or a mule, a good system or a bad system, you will know for yourself. The trading techniques mentioned in most books look very powerful. If they slip away, there will be problems and the actual operation will lose money. Therefore, no matter how powerful the technology is, if you haven't tested it yourself, you will know.
1. Common deception methods to prove profitability: carefully select many successful cases.
We have read a lot of books on trading, or met some so-called "experts" in reality. After explaining his trading system, we often quote many carefully selected examples and try to prove the profitability of his trading system with many successful examples. As an audience, we are also easily deceived, because so many successful examples can't prove the profitability of this trading system? For example, when explaining his trend trading system, he will carefully select cases with relatively stable market trends. After his opening signal was issued, the market went up all the way, and finally the profit was quite rich, which surprised the audience or readers. If he had his trading system at that time, he would have made a fortune; If it is to explain the bargain-hunting trading system, then it is necessary to carefully select cases of market fluctuations.
Photo: Carefully selected successful cases make you greedy and convince you?
To put it bluntly, even Tom or Tom's broken trading system, I can find thousands of successful examples, because there are thousands of market trends, and it is easy to find all kinds of special successful cases. But no matter how many successful cases, it can't prove that the trading system can be profitable, because there are likely to be more failure cases, which can prove that the trading system can't be profitable, that is, it can be falsified.
2. How to correctly confirm whether the trading system can be stable and profitable? Large-scale double-blind trial
We need to prove that the trading system is profitable, and at the same time, we need to falsify losses. We not only need to find countless successful cases, but also need to find countless failed cases to see whether the comprehensive result of successful and failed cases is a loss or a profit. At this time, it can be confirmed and falsified.
We have talked about this issue many times before, that is, a large-scale double-blind test or statistical summary, which simulates many stocks or varieties in a practical way. After many bull-bear cycles, there will be thousands of market trends at this time, which will also include countless success and failure cases. Then at this time, we can test whether it can make a stable and sustained profit, and the capital curve will be reduced and smooth, and the capital curve can not be ups and downs. If there are ups and downs, even if it is profitable,
Remember, the large-scale double-blind double-blind capital curve is the core criterion and the only criterion to judge whether the trading system can be profitable.
No matter how badly you blow the trading system, you shouldn't believe it. You have to go through many double-blind tests yourself. After all, most people will deliberately choose some market segments or successful cases to verify their trading systems.
Author | Egg yolk investment, more than 20 years of trading experience, want to learn stock fund futures can add V: ZO 53646, free access to information.