Is Your Trading System Objective?

When you make a decision to buy or sell, do you refer to current policy interpretations, industry news, and market sentiment? If so, then your system is not objective, because you cannot quantify these conditions into a standard. Without standards, it cannot be implemented objectively, and the stability of the system will be destroyed. So why do many institutions do such fundamental analysis? Because organizations will have their own analysis models, such as analyzing public opinion through big data.Quantitative analysis, as a criterion for judging market sentiment. And what about our small retail investors? It has no advantages in terms of information, capabilities, algorithms, etc. Subjective variables are added to the system. Another disadvantage is that you cannot verify and train your system by reviewing historical data, which makes it difficult to improve and optimize, and cannot be proven or falsified. This is metaphysics. Once you fall into this vicious circle, you are not far from metaphysics.

How does the trading system work? The answer is just one word, guess.

Everyone will definitely have two questions:

First, if you rely on guessing, the winning rate is also 50%. What is the difference between that and tossing a coin?

Second, didn’t you agree not to predict the market or guess? Why did you get slapped in the face?

Let's answer the first question first. First of all, if you look at the market, if you place an order randomly from any place, no matter long or short, in the long run, its winning rate is 50%. However, the profit and loss ratio is fixed, that is, a mathematical expectation is zero. The purpose of using a trading system is to ensure that your expectations are positive, so you cannot simply look at the winning rate. In other words, guessing coins is a blind guess. The trading system has a reason to guess the dish with a probability advantage. The second question is, don’t predict the market, don’t even have a fixed judgment on the market, don’t think that there will definitely be an increase here, the main support here will definitely be useful, and it will definitely reverse. The function of the trading system is to use a set of methods to give you a reason to guess that there may be major support in this place. As for whether there is or not, we need to look at the price behavior. When the price performance tells us that the resistance here is very strong.

We have reason to guess that a reversal may occur here, and then we will formulate our trading plan. If a reversal occurs, I will enter the market when the reversal is confirmed. If the reversal fails, I will stop the loss when the trend continues. If the reversal is successful, I will take profit in the next main area. Look at these three situations, I don't predict which one will happen, but I will perform the corresponding operation if it happens. Therefore, there is no contradiction between guessing and not predicting. Maintaining two completely opposite concepts at the same time and still acting normally is a sign of first-rate wisdom.