I am often asked similar questions, such as when can I start making a profit if I start learning now? Is three to four months enough? Or does it take two or three years to become profitable? How long does it take to master a trading system? When can I become a full-time trader? And so on.
It's quite normal to have these questions because everyone wants to see tangible results when they work hard and don't want to put in a lot of effort only to end up with an uncertain outcome.
However, there is indeed no absolute answer to this question, just as when you ask others how long it takes to get into Tsinghua University. This is because everyone's way of thinking, self-control, and learning ability are different, which leads to different learning efficiencies. Plus, some unexpected opportunities and whether one has taken detours in trading cognition, these comprehensive factors determine the time it takes to reach your destination.
So, how can we improve our efficiency in understanding a trading system?
I believe the following steps are the necessary path to thoroughly learn a trading system, which I have practiced and now share with you.
1. First, choose a trading model that suits you.
Learning to take the initiative in trading is very important. Don't wait for others to passively input knowledge to you. The learning process must be accompanied by anxiety and pain, so be prepared for this.
What we need to learn includes the basic principles of the market, the theory of technical analysis, and the knowledge of trading systems, etc. These contents are neither too much nor too little, but mastering them does require some effort, and this will also filter out some traders who have no interest in learning and researching.
These contents can be found online or in books, and the key is whether you have the intention to find them and summarize them. This is a very important process of active learning.
After learning these basic contents, you will have a very concrete understanding of trading, and you will know that trading involves many markets and many models, such as funds, stocks, futures, foreign exchange; short-term, medium-term, swing, long-term; trend, oscillation, and so on.You can find a suitable approach among these patterns, such as choosing to trade by bottom-fishing on the left side or following the trend on the right side, deciding whether to hold the trend for a large profit-loss ratio or to take fixed profits in waves after entering the market, and so on.
Once you have chosen a trading pattern, you can establish a trading system with a clear direction, knowing where the target is, and thus you can study precisely.
2. Establish a trading system.
A trading system is actually a very simple thing; it is composed of several elements, namely confirming bullish or bearish, entry, stop loss, take profit, and money management. These elements determine all your trading actions in the market, so you won't be like a headless fly, not knowing what to do when trading.
Reviewing past trades is the best way to test the effectiveness of this trading system, and we will also adjust our trading system parameters through review. Take confirming bullish or bearish as an example.
First, use moving averages as the standard for confirming bullish or bearish, then follow up with entry, stop loss, take profit, and money management to review, and obtain a simple profit and loss result.
Next, use trend lines to confirm bullish or bearish, use MACD divergence to confirm bullish or bearish, and several other methods, all followed by the same entry, stop loss, take profit, and money management, to review and obtain different profit and loss results.
After comparison, we will know which method is best for confirming bullish or bearish, and we can adjust our trading system accordingly.
The same goes for other elements, such as entry methods, stop loss and take profit methods, and money management; we can all test and adjust them through review.After a period of review, we will obtain a relatively complete and profitable trading system. This process usually takes from a few months to several years, as everyone's efficiency and comprehension abilities vary, but it is a necessary path.
3. Simulation and live account testing.
Simulation is also a great testing tool because there will always be some distortion of data in the review software. Simulation accounts replicate the real market on a 1:1 basis, which will more accurately test our trading system.
We need to conduct simulated trades while keeping a record of the transactions. After a period of time, we will discover minor details that were not apparent during the review, such as issues with trading frequency, monitoring the market, and our own habits. Then, we can go back and make minor adjustments to address these issues.
After that, when entering the live market, we will be more confident, but it is also necessary to start with small positions in the live account because the trading mentality between the simulation and live accounts is different. Small positions can help maintain the integrity of our trading behavior and make it easier to control our mindset. Gradually test our tolerance, and once we are comfortable with small positions, we can slowly increase the amount.
In the world of trading, everyone wants to make quick money and is in a hurry. If we can take our time and be patient, we will achieve better results.
4. Complete understanding.
When you have been using the trading system in live accounts for a long time, maybe years or even decades, you will realize that trading is just that. Although the market keeps fluctuating, it is also constantly repeating itself. If we look at the long-term cycle, making money is just a matter of time.
Moreover, you will find that the entire trading logic is not complicated at all. All the knowledge you have learned and all the trading psychology shared by others, you can fully understand now, and knowledge can be condensed into just a few sentences.
At this point, you can truly say that trading is not difficult because you have sorted out all the threads, seen the full picture of trading, and all that is left is simple execution.
