What Is Late Trading?

The trading system is the materialization of systematic trading thinking. System trading thinking is a concept, which is reflected in the overall observation of price movements and continuous observation of time in market judgment analysis. A comprehensive manifestation of the three major elements.

Trading System

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The trading system is

Trading system refers to a set of rules that can realize stable profit in the trading market. It includes scientific fund management, effective analysis techniques, and good risk control. Its ultimate purpose is to achieve a stable profit for traders.

It can be divided into subjective trading system, objective trading system, and a combination of both. A trading system is the brainchild of a trader, which embodies the trading philosophy of a trader. Therefore, it is not universal, that is, a trading system can exert its maximum effect only in the hands of its creator. So for traders, only by building their own trading system can they embark on the path of stable profitability.

In stock,

The term Trading System became popular on Wall Street in the late 1970s (without rigorous research). Around the mid-to-late 1990s, the term returnee entered the domestic investment community. At present, there are not many monographs on the trading system in China. Among them, Tao s "System Trading Method" is widely regarded as a classic, and others include Wang Dayi's "Winner Ideas", Jin Shi's "Permanent Survival", and Park Tiejun's "Band Win Gold. "

In addition, Xuefeng's "Technical Analysis Techniques of the Stock Market" actually talked a lot and was very practical. The books imported from abroad include Van Sakai's The Road to Freedom to the Financial Kingdom. This book is mainly from the perspective of a trend-tracking system and is not comprehensive. Unfortunately, several of the top classic books on foreign trading systems on Amazon have not been translated, such as good books like Design, Testing, and Optimization of Trading Systems.

In addition to statistical arbitrage and high-frequency trading, trading systems can generally be classified into five types:

I. Trending Trading System

The trend following trading system is the most popular and popular type of trading system before the exposure of high-frequency trading. The earliest trend-following trading strategies were formed in the early 20th century, and they mainly used moving averages to buy, hold, and sell. Later, thanks to the computer-generated signals for opening and closing positions, today's trend following system is more complete and mature. However, no matter how modern it is, the trend following system will fail in some market situations.

The trend-following system assumes that the stock or futures market is forming a strong upward or downward trend. In general, we believe that a strong upward or downward trend means that the price runs along an upward or downward channel with an angle greater than 35 degrees, and the retracement is small. For example, in an uptrend, the adjustments are small and profit closeouts are not obvious.

From the historical data, the market is in the trend market within 30% -35% of the time. In a trend market, there are usually factors that make investors more greedy (in an uptrend) or more fearful (in a downtrend). These extreme emotions and behaviors of investors often lead to rapid changes in market prices. The trend following system is to take advantage of this, and can often get rich profits in a short period of time.

To catch

The importance of trading systems is receiving increasing attention from investors. With China

"Know Yourself" is the famous text engraved on the ancient Greek colonnade, and it is also the trading quote engraved in the heart of every trader. The trading system is the tool of the trader.

Understanding the trading system

Many people in the investment industry know the concept of the trading system. Although the trading system is often hanged on the lips, in fact, there are not many investors who can correctly understand the trading system, understand the components of the trading system and the production process, and a considerable part of the investment There are various misunderstandings of the trading system. A comprehensive and correct understanding of the trading system should be this: The trading system is a complete set of trading rules. This trading rule is objective, unique, and quantitative. It strictly stipulates all aspects of investment and requires investors. Follow its rules exactly. Its components include: predictive analysis module, risk management and investment strategy. The function of the predictive analysis module is to give signals of entry and exit; the function of risk management is to protect funds and profits; the function of investment strategies is to indicate specific operations in different actual situations. The misunderstanding of the trading system has the following aspects. The root cause of these misunderstandings is that these investors lack a comprehensive understanding of the trading system. Misunderstandings due to lack of understanding of the trading system

Myth 1

The function of the trading system is to save time. A completely designed trading system can really save the time of traders, but this is just one of several benefits that the trading system itself brings to traders, and it can even be said to be incidental. A benefit. Because a complete trading system makes strict principles for investors, investors must fully follow the instructions given by the trading system. It can be said that investors are not allowed to flexibly deal with entry and exit and position control. Therefore, as long as it operates in accordance with the trading system, investors do not need to watch the market every day. In fact, many investors spend a lot of time staring at the market every day, especially some investors who focus on the outer disk. The trading system is used, and the operation of mark-to-disk is left to the trading system for processing. Investors only need to execute according to the signals given by the trading system. But saving time is not the function of the trading system. The function of the trading system is to obtain profits steadily. Many investors think that they have a strong ability to make profits, and there is no need to design a system to limit their flexibility. In fact, these investors have mistakenly used the experience of obtaining profits as their ability to obtain profits. It can be said that most investors have a history of making profits, but they do not necessarily have the ability to make profits. If these investors can be provided with a well-functioning trading system, it is not important for them to save time, but to make money for them.

Myth 2

The trading system is a forecasting system. An important part of the trading system is to give buy and sell signals. Each buy and sell signal necessarily corresponds to the research and judgment of the future market. A buy signal means that the trading system finds that the trend of the market conforms to a predetermined characteristic. This predetermined characteristic represents that the adjustment has ended or the price has broken through in principle, changing from a bear market to a bull market. Therefore, the trading system believes that it is possible to buy, but this signal does not mean that the market will have a 100% possibility to change, and sometimes the signal will be wrong, and even the possibility of error will be very high in a certain period of time. If investors buy according to this signal, heavy positions or even full positions, the risks will not be controlled, and investors may suffer heavy losses. In fact, the analysis and forecast function is only a part of the trading system. There are two other important components of the trading system: risk management and investment strategy. These three parts are mutually reinforcing. Without any part, the trading system is incomplete and none of the investments can be managed well. If the trading system is used only as a forecasting system, without focusing on risk management and investment strategies, investors may lose money even if they have better buying or selling opportunities. Only a good risk management, investment strategy and forecasting system are matched to maximize profits when the signals are correct; when the signals are wrong, you can stop loss and exit in time. Such a trading system is a complete trading system.

Myth 3

The trading system is a computer program. Many people think that the trading system is a computer program. In fact, the trading system that people can see on the computer is just one of its main materialized manifestations. People call it a program trading system. In fact, the trading system does not necessarily need to be embodied by a computer program. If people can quantify, principle, and uniqueize predictive analysis, risk management, and investment strategies, and form a combination of manual identification (not realized by computers), then The combination is also a trading system. However, because people need to perform a lot of data statistics and analysis during the production process of the trading system, if these tasks are performed manually by people, it is time-consuming and labor-intensive, and the use of computers can greatly improve the production efficiency of the trading system, and the system can be timely The producer's thoughts are reflected. Moreover, putting the trading system on a computer and giving various signals from the computer, such signals are more objective, can promote traders to better execute the trading system, and avoid the fluctuation of artificial emotions to affect the investment. Therefore, most trading systems are programmatic. From this we can see that a program trading system is not just a computer program. It is a materialization of a combination of forecasting, risk management, and investment strategies in a computer. It is a very complex system.

Design of trading system

Myth 1

Trading system is the optimization of indicators. Many producers of trading systems believe that trading systems are indicators after optimization. Therefore, these producers are keen to use the indicator optimization function of stock analysis software to calculate and assign specific parameters to each indicator every day. In fact, these people have made two mistakes. One is that the predictive analysis part of the trading system is mistaken for the entirety of the trading system, and the risk management and investment strategies are ignored. However, these two parts are sometimes more important than the predictive analysis part. Second, in addition to the optimization of indicators, the predictive analysis part of the trading system also includes the reflection of investment concepts. First of all, when making the predictive analysis part, the producer must know the trend of the target variety very well, and already have good technical analysis methods. Even without optimization, the producer can artificially and accurately analyze it. Second, the producer must combine several conditions, not only to optimize the existing indicators, but also to program his own analysis ideas, or to say that he has compiled a new composite indicator. These composite indicators are debugged and then optimized to improve performance. Only in this way can it constitute the prediction and optimization part of the trading system.

Myth 2

The total profit of the trading system is the most important. The trading system that can get the most profit is the best trading system. The total profit of the trading system is indeed an important basis for measuring the quality of the trading system, but it is definitely not the most important. Many problems will occur in practice when the system of data inspection can obtain the maximum profit. First of all, this total profit is related to the number of years of historical data used for calculation. It may be that the amount of profit in one year is particularly high and the amount of profit in several years is also high. Such a system is not desirable in practice because we do not Know whether the future market is similar to the high profit market in the history of the system, or it is likely to be inconsistent. If the future market is inconsistent, using this system will not be able to obtain high profits and may even lose money. Secondly, we should first avoid market risks in practice, and then obtain stable benefits on this basis. If we pursue the pursuit of total profit first, we must assume greater risks. Therefore, the trading system should be secure first, capable of avoiding market risks, and secondly stable, capable of ensuring profitability in different situations, and then gaining the greatest possible benefits.

Implementation of trading system

Myth 1

Many people use the trading system, so the idea of not making a profit is to confuse the trading system with common software. They think that if more people use it, it will be inaccurate and affect profits. Trading systems are very personal, they are the materialized embodiment of trading ideas, because everyone's trading ideas cannot be the same, so these trading systems will not produce consistent behavior in the process of use. The use of more of these systems is indeed no different from commonly used software. It will reduce profits in the process of practical use, but this may be due to the quality of the trading system. After all, a good trading system can get a high amount through the market. profit.

Myth 2

The trading system is relatively mechanical, and it can only be used as a reference. People who have this view have not been clear about the nature of the trading system. The essence of the trading system is to help investors refine their trading ideas, form a standardized norm and restrict investors to follow the norm. Carry out investment operations to avoid losses caused by artificial emotional fluctuations. The trading system is made by investors. If the trading ideas of investors are more mechanical, the formed trading system will be more mechanical; if the trading ideas of investors are more flexible, the formed trading system will be more flexible. Of course, not all investors can refine their thinking and form a trading system. Only mature trading ideas can form a trading system. In fact, the trading systems we can usually see are the optimization of some indicators, or the predictive analysis systems that do not reflect risk management and trading strategies. These so-called trading systems are not really mature trading systems. They guide the process of operation. China is indeed more mechanical.

Myth 3

The profit of the trading system is theoretical, but in practice there are some trading systems that do encounter these problems. Most of these trading systems are trading systems that generate signals during the trading session. In actual operation, if these signals cannot be placed in time through the computer after the signal appears, every time you place an order manually after the signal appears, there will be a certain lag, and the transaction price may be unfavorable, so the profit in actual operation The profit of computer simulation disk is not always high. But the root cause of this problem is not that the profits realized by trading systems are theoretical, but that there are problems in the design of these trading systems. The trading system is to provide investors with direct trading support and help investors comply with established principles. If in practice the use of real-time signals to guide the operation cannot be achieved, then the investor should follow a certain time that he can accept. Use signals to perform operations, such as the operation of closing prices according to whether there is a signal when closing. In fact, the signals given during the session are often false. For example, the intraday price broke through a key resistance level, the trading system sent a buy signal, and then the price fell back below the resistance level. The signal disappeared. If you follow this false signal, you will cause unnecessary losses.

Myth 4

Transactions should be continuous. Many traders have a trading system that has been tested to be stable and profitable, but still not profitable, thus doubting the correctness of the trading system. In fact, sometimes it may be caused by discontinuities in your own transactions. The accuracy of a system cannot be 100%, so stop loss in the face of errors. If you encounter several stop-loss quotes in a row, the trader has entered the market, but when you encounter a profitable market, the trader does not enter the market for various reasons, so it will be a loss in the long run. The correct approach is: Grasp the opportunity of each entry, do not miss any opportunity, because you do not know whether the next opportunity is profitable or loss!