How to Set Up an Improved Trading System?

1. Make a plan

Predicting prices: Discern and confirm whether the trend is bullish or bearish based on the fundamental analysis and technical analysis. All follow-up operations may be problematic if the prediction is wrong.

Choosing timing: Although transactions at any point can be reasonable, not every point is indicative of the best timing for entering or exiting the market.

Traders dont have sufficient opportunities for rectification under the leverage principle of throwing out a minnow to catch a whale, which leads to a crucial role played by the choice of timing. A favorable point of entering the market can equip you with more chances to put things right.

2. Conduct capital management

Rigorous management on funds can protect you from large risks if you lack the knowledge of market analysis, the time to watch trading charts, and a strong personality.

Principles of managing funds:

(1) The total amount of investment should account for 50% of your assets or less.

(2) The amount of every transaction should be less than 10% to 30% of your available funds.

(3) The cap of losses generated in a single transaction should be less than 10% of your total funds.

(4) Stop-loss should be set up for every transaction.

(5) Purchases and sales should be conducted based on the pyramid structure.

(6) The risk-and-return ratio should be 1:3.

3. Build a trading system suitable for yourself

A trading system consists of market analysis, choice of timing, risk management, time of holding positions, capital management and trading mentality.

Principles of setting up:

(1) Your trading style should be clear-cut when choosing short-, medium- or long-term transactions.

(2) Your trading system has to be feasible, featuring clear trading signals, the capacity of risk management and the ability to gain profits.

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