The Essence and Construction of the Trading System

The trading system is a complete set of operational rules, similar to human-computer interaction systems in computers or the reflex mechanism in biology. It encompasses a series of rules including entry, exit, stop-loss, and take-profit.

Many investors have misunderstandings about trading systems, believing that having a trading system guarantees profitability, or seeking a "universal" trading system. However, this is not the case. There is no trading system in the world that can consistently generate profits; even excellent systems require users to possess strong execution capabilities.

The core metric for evaluating a trading system is the "profit-loss ratio," which is the average profit amount divided by the average loss amount. An ideal profit-loss ratio should be no less than 2, with 3 being considered acceptable, and above 5 being an exceptionally rare system.

Before designing a trading system, it is necessary to clarify investment objectives, expected returns, and risk tolerance. A well-rounded trading system should include the following elements:

1. Cycle Judgment: Analyze the Market Trend
2. Operational Thinking: Define Basic Strategies
3. Select Coins: Filter Potential Coins
4. Timing: Determine the timing for buying and selling
5. Trading Rules: Establish Entry and Exit Conditions
6. Capital management: Reasonable allocation of funds
7. Risk Control: Establish a Stop-Loss Mechanism

In terms of selecting coins, it is especially important during a bull market. The ideal coin should have a moderate circulation supply, promising themes, and actual on-chain data support.

Timing and trading rules need to be flexibly adjusted according to market conditions, but should follow basic principles such as buying points based on technicals. Capital management includes regulations such as profit protection and leverage usage, and beginners should use leverage cautiously.

Risk control is an important safeguard for trading systems, helping to avoid losses caused by greed or a sense of luck.

A simple trading system example is the Granville's Eight Principles, which provide buy and sell signals based on moving averages. Although simple, it still needs to be adjusted according to specific market conditions in practical applications.

In summary, the core of the trading system is to provide investors with a standardized set of operating guidelines to help control emotions and improve trading efficiency. The complexity of the system is not necessarily related to its effectiveness; the key is to find an efficient operating system that suits oneself.