Market research module
It serves the trading strategy and fund management. Aside from this point, any market judgment has no target, no standard can be set, and there is no practical significance. The research contains predictions, but not only the pre-opening forecast, but also the tracking evaluation after the opening of the position.
Market research needs to answer two questions:
1. when to enter
The answer must be clear, it can be an exact price, or a clear interval. In general, regardless of the analysis method used by investors, the types of incoming signals can be roughly divided into two types:
1) Homeopathic trading type: Take advantage of the trend.
2) Contrarian trading type: low suction and high throw.
This is two completely different analysis ideas, and both of them can be used, but it is better not to switch ideas in the transaction!
2. when to leave
Leaving contains three layers of meaning:
1) because the development of the market does not meet the investor's position standards;
2) for stop loss and take profit;
3) it should be proactive.
The market research must clearly answer this question. Compared to the first question, this question is easily overlooked, so this issue is more important. When to enter is determined by when to leave.
Fund management module
The purpose of futures trading fund management:
It is to survive in the market and survive for a long time.
In order to survive, losses must be limited as small. This "small" is a relative concept. Although everyone understands differently, it should be our absolute pursuit in the transaction process, because we can't predict that there will be how many times of losses in succession. We can only control that every loss is small.
2. Profit is the ultimate pursuit of futures trading. Only profit can make up for the loss and finally leads to profits.
Apply the words of the investment master: limit the loss to a small amount and let the profit run. It is this requirement that determines the third question that needs to be answered in the market research: the market research must be able to measure the ratio of profit and loss, otherwise it will be proved to be flawed.
It should be emphasized that since we do not know how many times we will lose money in a row, we must actively hold the positions once we start to make a profit. This has two implications:
(1). We can't know if the profit has already been maximized. Only when profit starts to retrace, can we know which position the biggest profit point is, even if you are an investor who is good at measuring the amount.
Because some market changes will cross the time level, for example, the daily-level market has evolved into a weekly-level market, so there is profit. As long as our position standards are still there, we may wish to hold positions more firmly, and we must not "chase profit" without any principle.
2. Many market trends will be repeated at the beginning. We may fail to attack once, twice or even several times. In order to maintain the ability to "attack", profits must be able to make up for multiple attacks. If you can't do this, it means that the market research may have something wrong.
In short, "gain after you know how to stop", "do what your strength allows." No matter how to stress the fund management, it is not enough. It’s the most personal aspect of all trading process, reflecting all aspects of the investor's personality. There is no good or bad, and suitable is good.
With the above quantification, it is easy for investors to clarify the “lossy resources” that can be used in each transaction or in each period. Many people compare all investment margins to "bullets". I think it should be more appropriate to compare their losses to "bullets". Bullets can't be back when they are shot, but in order to get "prey" we must fire "bullets". If the loss amount is running out, you should stop trading.
The combination of the market research module and the fund management module can measure a reasonable and clear loss limit, which helps to improve execution.
Trading strategy module
This is the most flexible part and it most needs effort. In this session, many investors have overlooked a problem: the rhythm of the market trend. Formulating an appropriate trading strategy is to accurately follow the rhythm of the market trend. The trading strategy needs to finish off the following three issues:
Time to enter
After determining the time level of your trade, what do you think of your entry signal? For example, wether enter or not when a daily-level trader who want a breakthrough face the opening gap during the entire trading day; wether to leave or not when it retreats within the key point?
In order to avoid these problems, the daily-level trader should probably enter according to the signal when it’s about to close, filtering out the day's signal. This may miss some profit margins, but you can avoid unnecessary stop-loss actions caused by intraday fluctuations and avoid disadvantages.
As a futures investor, you should put avoiding disadvantages first. It is just an example. It is not to say that this is the only or best way. Investors should have a clear standard for the timing of their trading.
2. How to deal with market emergencies
This is a very important issue. For emergencies, there must be a positive response, regardless of whether the emergency is beneficial or not. Many investors believe that although unexpected events can cause abnormal fluctuations in the market, accelerate a wave of trend, or slow down a wave of trend, but most of events cannot change the trend of the market.
Since it is a "burst", there is no prediction, and you might as well not to consider it. Obviously this view is a bit negative. The government has been actively calling on all walks of life to establish an "early warning mechanism", and futures investors should also establish an "early warning mechanism" to ensure the smooth implementation of trading strategies to the greatest extent. Otherwise, the rhythm will be disrupted by unexpected events, and blindly entering or passively leaving will occur.
3. Adding and subtracting positions, smoothing the mind
I have never believed that some investors can be calm as still water when they face the ups and downs of the market, the profits and losses of the funds. It’s known that the two weaknesses of human nature - greed and fear - have been magnified many times in futures trading, causing a lot of trouble for traders, and all investors are trying to overcome these weaknesses.
I believe that overcoming weaknesses should start with respect for weaknesses. Weaknesses are born, and they all play a role at all times, and we cannot get rid of them. But we can formulate a clear trading strategy, through the addition and subtraction of positions, to smooth or offset the test from profit and loss fluctuations on human weakness.
The general principle of adding and subtracting positions: when you lose, don’t add position; when you gain profits, you only add according to the pre-set measured ratio. It should be noted that this is a general principle, not the only standard.
The maximum risk of the account will be controlled at 25%. Usually 1/3 of the investment amount will be closed when the signal is unclear, and this profit will be used to guarantee another 1/3 of the investment, so that only 1/3 of the investment amount is risky, while at the same time there is 2/3 of potential to gain profit. So that investors are in an invincible position, while not affecting the mood due to the big fish slip away, maintaining a calm state of mind.
The trading system is a whole, each module is an organic combination, not a simple superposition. A good trading system does not highlight a certain module but is considered and synchronized in whole. Every detail of a good trading system is holographic, reflecting all the information, goals, principles, skills and so on.
The hardest thing for people to do is to understand themselves and evaluate themselves correctly. The trading method can be learned, but while learning it is necessary to combine the analysis and understanding of yourself. The method that suits you is likely to be the best method.