The 10 Power Principles of Successful Trading Systems (10個成功交易系統的威力規則)
Principle #1: Few rules - easy to understand
It may surprise you that the best trading systems have less than 10 rules. The more rules you have, the more likely you "curve-fitted" your trading system to the past, and such an over-optimized system is very unlikely to produce profits in real markets.
It's important that your rules are easy to understand and execute. The markets can behave very wildly and move fast, and you won't necessarily have the time to calculate complicated formulas in order to make a trading decision. Think about successful floor traders: The only tool they use is a calculator, and they make thousands of dollars every day.
Principle #2: Trade electronic and liquid markets
We strongly recommend that you trade electronic markets because the commissions are lower and you receive instant fills. You need to know as fast as possible if your order is filled and at what price, because based on this information you plan your exit. You should never place an exit order before you know that your entry order is filled. When you trade open outcry markets (non-electronic) you might have to wait a few minutes before you receive your fill. By then the market might have already turned, and your profitable trade become a loss!
When trading electronic markets you receive your fills in less than one second and can immediately place your exit orders. Trading liquid markets you can avoid slippage, which will save you hundreds or even thousands of dollars.
Principle #3: Make consistent profits
You should always look for a trading system that produces a nice and smooth equity curve, even if in the long run the net profit is slightly smaller. Most professional traders prefer to take small profits every day instead of big gains every now and then. If you trade for a living, you need to pay your bills from your trading profits, and therefore you should regularly deposit profits in to your trading account. Making consistent profits is the secret of successful traders!
Principle #4: Maintain a healthy balance between risk and reward
Let me give you an example: If you go to a casino and bet everything you have on "red", then you have a 49% chance of doubling your money and a 51% chance of losing everything. The same applies to trading: You can make a lot of money if you are risking a lot, but then risk of ruin is very high. You need to find a healthy balance between risk and reward.
我舉個例 : 如果你去賭場而賭你身上所有在”RED”上，你有49％機會將你的錢翻倍而有51％的機會輸光所有。一樣的道理在交易上 : 你可以賺很多錢如果你冒很大風險，但毀滅的風險非常高。你需要在風險與報酬之間維持一個健康的平衡。
Let's say you define "ruin" as losing 20% of your account, and you define "success" as making 20% profits. Having a trading system with past performance results let you calculate the "risk of ruin" and "chance of success". Your risk of ruin should be always less than 5%, and your chance of success should be 5-10 times higher, e.g. if your risk of ruin is 4%, then your chance of success should be 40% or higher.
Principle #5: Find a system that produces at least five trades per week
The higher the trading frequency the smaller the chance of having a losing month. If you have a trading system that has a winning percentage of 70%, but only produces 1 trade per month, then 1 loser is enough to have a losing month. In this example you could have several losing months in a row before you finally start making profits. In the meantime, how do you pay your bills?
If your trading system produces five trades per week, then you have in average 20 trades per month. Having a winning percentage of 70% - your chances of a winning month are extremely high. That's the goal of all traders: Having as many winning months as possible.
如果你的交易系統每週有5次交易，你每月平均有20個交易。以70％的勝率，你當月賺錢的機率非常高。那是所有交易者的目標 : 賺錢月份盡可能的愈多愈好。
Principle #6: Start small - grow big
Your trading system should allow you to start small and grow big. A good trading system allows you to start with one or two contracts, and then increases your position as your trading account grows. This is in contrast to many "martingale" trading systems that require increasing position sizes when you are in a losing streak.
You probably heard about this strategy: Double your contracts every time you lose, and one winner will win back all the money you previously lost. It's not unusual to have 4-5 losing trades in a row, and this would already require you to trade 16 contracts after just 4 loss! Trading the e-mini S&P you would then need an account size of at least $63,200 just to meet the margin requirement. That's why martingale systems don't work.
你也許聽過這策略 : 加倍你的合約於每次你虧損時，一次就能贏回最近所有輸去的。連續4-5次虧損交易是不尋常的，而這會使你需要去交易16個合約在4次虧損之後！交易e-mini S&P 你需要你的帳戶金額至少$63,200的保證金需求。這就是為什麼加倍賭注系統不能用。
Principle #7: Automate your trading
Emotions and human errors are the most common mistakes traders make. Clearly, they are to be avoided by any means possible. Especially during fast markets, it is crucial that you determine the entry and exit points fast and accurately; otherwise, you might miss a trade or find yourself in a losing position. For that reason you should automate your trading and look for a trading system that either already is or can be automated. Automating your trading makes it free of human emotion. The buy and sell operations are all automatic, hands-free, with no manual interventions and you can be sure that you make profits when you should, according to your plan.
情感與人為錯誤是交易者最普遍的失誤。 無疑的，這些失誤應該用盡各種可能方法避免。 特別是在快速市場，你快速而準確地決定進出場點位是非常重要的 ; 要不然，你可能錯失一個交易或者你發現你在一個輸的局面。為這個理由你應該自動化你的交易而去尋找一個交易系統是已經自動化或可以被自動化。自動化你的交易會使你的交易沒有人性情感因素。買與賣都是自動的，免用手，沒有人工介入。你可以確定依據你的計畫，你應該獲利時你會獲利。
Principle #8: Have a high percentage of winning trades
Your trading strategy should produce more than 50% winners. There's no doubt that trading systems with smaller winning percentages can be profitable, too, but the psychological pressure is enormous. Taking 7 losers out of 10 trades and not doubting the system takes great discipline, and many traders can't stand the pressure. After the sixth loser they start "improving" the system or stop trading it completely.
Especially for beginners it is a big help to gain confidence in your trading and your system if you have a high winning percentage of more than 65%
Principle #9: Look for a system that is tested on at least 200 trades
The more trades you use in your backtesting (without curve-fitting), the higher the probability that your trading system will succeed in the future. Look at the following table:
The more trades you have in your backtesting, the smaller the margin of error, and the higher the probability of producing profits in the future.
Principle #10: Chose a valid backtesting period
I recently saw the following ad: "Since 1994 I've taught thousands of traders worldwide a Simple and Reliable E-Mini trading methodology".
我最近看到一則廣告 ：”自從1994年，我教導過全球成千交易者一個簡單而可靠的E-Mini 交易方法”
That's very interesting, because the e-mini S&P was introduced in September 1997, and the e-mini Nasdaq in June 1999, therefore none of these contracts existed before 1997. What kind of e-mini trading did this vendor teach from 1994-1997???
這是非常有趣的因為e-mini S&P是在1997年9月才開始的而e-mini Nasdaq是在1999年6月，因此1997之前沒有任何合約存在。這個賣方在教什麼e-mini交易？
The same applies to your backtesting: If you developed an e-mini S&P trading strategy, then you should backtest it only for the past 2-4 years, because even though the contract has existed since 1997, there was practically no one trading it (see chart below):
你的回測也是一樣:如果你研發一個e-mini S&P交易策略，那你應該回測過去2-4年而已，因為即使合約自從1997即存在，實際上那時並沒有人在交易(見上表) :
Now you should have working method for separating the good trading system from the poor one. By applying this checklist you will easily identify trading systems that work and those that will never make it.