The first part is the trend trading. The so-called trend trading is where the price evolves in a trendy way, we all know that the market is trending, but we don't know when the trend will occur. We try to track the trend above the middle level through constant tracking of the price, with constant attempts to pay the cost. When the trend happens, my trading system will follow the trend. This is the main way in which it is designed to follow trends above the middle of the market as a whole. I think you should have read the books on investing and not know if you can remember the three basic principles of market analysis:
First, the price includes everything, which I mean the market includes everything.
The second is that the price evolves in a trendy way, which is to acknowledge that the market is trending.
The third is that history repeats itself; all kinds of historical data and historical graphs are constantly changing in the future space-time; because data and graphs are the reaction of humanity behind it, and the fundamental theory of humanity does not change, so history will repeat itself again and again and again.
These three basic principles are the basic premise of technical analysis, and I have included them in my system.
The second part is the combination of investments. The concept is that there is no distinction between all varieties as long as they are the varieties in the trade. To me, no varieties are related, they are just a symbol. I have no preference or discrimination regardless of the size or size of the fluctuations between the varieties. Trend trading has been very difficult, and the wheat that I earned the most last year; the durum wheat is a very small variety that investors generally choose to ignore; but it is just that last year there was a wave of durum wheat that looks like a medium-term downward trend, only many people do not pay attention. If you are a portfolio investor; if you are a strategic trader, you are a part of the money in durum wheat, then you must pay attention; if you are subjective and arbitrary to choose varieties, I think the judgement component is large, but judging too much will cause problems. Judgment is a double-edged sword, and it can cause you incalculable damage if you get it wrong. One important benefit of combination investing is that it has a local, different-directional movement between the varieties when the trend is unclear. So when the trend is unclear, my holdings may have several blank heads or several multi-head states, so it plays a big role in the ups and downs of the overall interest.
Three, the features of my system. The first is that the system has been running for eight years, and the experience is relatively long, the bull market, the bear market and the sluggish market, basically all have been experienced. So now to see if this gain is still possible. Of course, the comparison of interests is meaningless, there are stronger players in the middle, certainly someone who has done a better system than I run for eight years can basically achieve a smooth transition, achieve positive gains. The second characteristic is that everything in the system is quantified. I have made all the trading elements quantified, open, close, stop, position. I have regulated all the steps, making it clear that as long as its conditions are met, it will work. This benefit prevents emotions from having a negative effect on you, allowing you to operate smoothly in this complex market. Thirdly, the shock cost of the trading system is not high, the so-called shock cost refers to the effect of the price on the opening and closing of the position itself. I do a long-term structure of the trade, generally the shortest trading time is more than 20 days, so it does not matter much about the price point. The account is 10 minutes earlier or how much time to enter is irrelevant. The fourth is that the implicit risk is relatively small. Because performance is not achieved by positioning, we now find that the average utilization rate is only 30%. The size of the position is not large, which will inevitably reduce the risk. In fact, there is really no good way to prevent risk, as long as your position is small, this is the most basic way. The idea of the system has also been proven over many years that it will inevitably capture the market above the middle level. The weakness of this system is that there is never a perfect system.
I think the experienced investors here have seen that when it comes to trends, it's cool to do it, but when it comes to fluctuations, it's definitely hard to do it. The biggest problem with systematizing trends is fluctuating markets. This is also the biggest challenge we face in our industry. How do we deal with fluctuating markets, or so-called flat markets?
The idea of some designers now is to separate trends from fluctuations, and the trend is to follow the market by holding static; while the fluctuating market is to buy low and buy high, and make money in two stages; to seek optimization and optimization, to try to do it perfectly, I think it's impossible. If you can distinguish between these two forms and then make money with different trading systems separately, then you must be a printer. Because you are stable, your money will roll larger.
If you want to optimize the system with multiple parameters, it will first cause inconsistency, stage A you use this parameter, stage B you use another parameter. Your system is not a quantitative way of thinking about transactions. This is a selective, judgmental transaction, which will also lead to nothing. The most important thing after the dot-com transaction is to find the right system continuously, to maintain its consistency.
So the importance of the portfolio investment I just talked about is fully manifested in the recent bubble market.
The weakness of this system was recognized later and many preventive measures were taken in advance. So there was a good result: I have never made more than 20% withdrawal in all these years, and the largest withdrawal was only 17.5%.
The first-capital utilization rate has always remained around 30%.
The second trade is a non-uptrend, so please understand that my trade is a non-uptrend. Unlike some traders who like to re-uptrend after breaking positions on a gradual basis. For security and stability, I do not uptrend.
The third is the combination investment, which can completely play a protective role in the midst of volatile markets. The local differences between commodities and movements are most pronounced during volatile markets. In fact, when systemic risk occurs, commodities generally fall basically in the same order. But during volatile periods, there are differences between the various varieties. For example, cotton suddenly pulled out a wave of the market in the previous year, other varieties have nothing.
Fourth, and lastly, there is the issue of implementation. To be honest, I can't sit down for so many years and execute completely for myself, because I'm also human, and I'm emotionally affected. Trading is difficult, my execution rate is over 70%, but like I mentioned, this trading system is basically profitable as long as the execution rate is over 60%. 7 percent is basically a fairly satisfactory return, 100% is a very, very high requirement.
Translated from Bell Labs