Just like running a company, operate your stock trading system.
To establish a company, you need to: register the company, set up the registered capital, determine the office address, select the products, determine the promotion methods, complete the transaction, provide after-sales service, and hire employees...
The stock trading system is the same - based on the amount of funds, complete: select stocks, time selection, position establishment, position management, and withdrawal.
A mature trading system requires at least 5 years.
One must overcome: the technical hurdle, the knowledge barrier, the system barrier, and the human factor barrier.
And go through the complete cycle: the downtrend phase, the ascending channel phase, and the flat period, before truly mastering it.
Incurring losses in the stock market is similar to suffering losses in business operations.
What we need to do is to identify the reasons behind it.
Many people think that losing money is due to:
- not understanding technical analysis
- not having insider information
- not having sufficient funds
However, these are often not the main reasons. The real issue is: Most people do not have a "trading system".
Before entering the market, they have never seriously considered:
What trading style suits them?
How much money can they afford to lose each time?
Under what circumstances must they stop trading?
How to exit after making a profit?
How to control their positions?
How to review and correct mistakes?
How to establish a complete stock trading system?
For an operating enterprise, if you have knowledge of finance and sales and you are a simple one-person company, you can handle it easily by yourself.
The stock system can also be regarded as a one-person company that you can operate yourself. In this "company", you need to learn the basic operating rules:
A truly mature trading system usually consists of the following components:
1、Fund management system
This is the part that is most often overlooked but is the most crucial. For example:
• Allocate funds among several stocks
• No single loss exceeding 2% of the total funds
• Always keep a portion of cash
• Do not over-hold positions in a single stock
• Do not increase risks due to short-term profits
Many people study candlestick charts for several years, but never study money management.
But the reality is: Even if the direction is correct, without position control, one may be eliminated by the market.
2、Buying Rules
Many people buy stocks with only one reason: "Just feeling that it will go up."
But a true system requires clear rules: For example:
• When to buy?
• Is it a trend break?
• Or is it a value underestimation?
• Does it fit within your own capability range?
• Is there a clear logic?
There is no standard, and thus no stable replication.
The K-line chart will help you filter out a large number of weak stocks.
3、Selling Rules
Many people will buy, but not many will sell. This is one of the most dangerous issues in investment.
Because:
- When profits are high, people tend to become greedy.
- When prices are falling, they tend to imagine a rebound.
Therefore, in the system, the following must be defined in advance:
- Stop-loss condition
- Take-profit condition
- Time period
- Position adjustment rule
Otherwise, the market will make the decision for you.
4、Risk control mechanism
A truly professional person, would not consider "how much to earn" first, but rather:
"How much will I lose if I make a wrong judgment?"
This is also the aspect that ordinary investors tend to overlook the most.
The market always involves uncertainties. Without risk control, even the best logic can completely fail at once.
5、Review System
Many people have been trading for many years, but they haven't truly grown.
Because they are merely repeating the same mistakes.
The true meaning of a review is not about how much money was made, but rather:
Why buy?
Why sell?
Which judgment is correct?
Which emotion influenced the decision?
Did it violate one's own rules?
Long-term review is essentially a form of cognitive training.
Stock trading is essentially about managing oneself.
Later, I increasingly realized that:
In the trading market, what ultimately matters is whether your trading system can sustain you for a long time.
Everyone in this market is unique, but regardless of the trading system, the ultimate test is:
• Emotional stability
• Risk awareness
• Execution discipline
• Long-term thinking
So truly mature investors are more like managers.
They won't lose control due to short-term fluctuations, but instead continuously optimize their systems.
Conclusion
Many people enter the market, hoping to find "methods for guaranteed profits".
However, what the market truly rewards, is not the smart ones. Rather:
- Those who can consistently and stably follow the rules.
- Those without a trading system will eventually be controlled by emotions.
While those with a system have the chance to truly navigate through the cycles.
---Extended Reading and Resources
The Super Laws of How I Turned $46K into $6.8 Million (14,972%) in 28 Months
This book is my introductory reference material.
It guides you step by step on how to select stocks, determine trading points, manage positions, identify hot sectors, utilize the trend of the overall market, learn to be patient when the market is not doing well, and control your emotions in the market.
I hope it will be helpful to you.
[A curated list of tools and books that have genuinely helped me on my journey. If you find them useful, they might help you too.]
[My reading list] & [My everyday toolkit]