Forex trading is a practice, and we foreign exchange traders are the enlighteners of this practice. However, not everyone can successfully enlighten.
- Some people persist for a long time and finally give up;
- Some people no longer do trading, but will still chat to retrieve their original trading memories;
- Some people are struggling at the door of success, but they just can't get through that door.
In fact, many people's skills and discipline are very good, and they only need a little bit of experience from an experienced person to pierce the last layer of window paper.
Today I will share a fool-proof moving average trading system that does not require any market analysis or trend analysis. I hope it can help everyone avoid detours and become a master of the foreign exchange market as soon as possible.
1
Mainstream trading systems and indicators
Before explaining my system, let me first talk about the mainstream trading systems and indicators in the market.
moving average system
is generally based on the moving average, plus MACD or KDJ indicator .
Advantages of this system: In the trend market, prices are arranged in the order of moving averages, and the operation is simple and the profit margin is large. MACD and KDJ deviating from the true situation can be a good way to catch the top and bottom of trend reversal.
Disadvantages of this system: In the volatile market, the moving average fails, and the false divergence between MACD and KDJ becomes a counter-trend operation. Everyone should know the degree of danger of counter-trend operation in a unilateral market.
BOLL system
generally adds an indicator KDJ or RSI on the basis of the BOLL line, and some people also cooperate with MACD. The advantages of this system:
: includes all prices in the boll track, which is very effective in dealing with volatile market conditions. Basically, you can go short on the upper track , and go long on the lower track.
Disadvantages of this system: 's entry point is inaccurate. In the trend market, there are two situations of retracement to the middle track and upper and lower tracks, so it is difficult to grasp the operation.
wave system and wave-based Dow system
Advantages of this system: wave system can well grasp the overall structure of the trend, which is macroscopic and intuitive. Dow has a very good definition of structure and a relatively clear understanding of the structure of the trend.
Disadvantages of this system: There are too many waves. Based on 5 waves, there are 9 waves, 13 waves, 15 waves and so on. Dow Theory is very easy to use in trending markets and defines the structure in oscillating markets. It's not accurate enough.
K line and K line combination system
This type of system puts aside the trouble of indicators and pays attention to K line form and combination. The most familiar shadow lines, cross stars, entity lines, etc. The combination is the familiar head and shoulders bottom , head and shoulders top and other forms. The advantages of this system:
: can grasp the trend structure very well, and a correct signal can basically give a relatively large space.
Disadvantages of this system: has low accuracy.
Resistance, support, trend line system
The basis of trading is mainly to rely on the drawing of various trend lines to find the resistance, support and trend structure positions in the market.The advantages of
- are: has a strong overall grasp of the market; the disadvantages of
- are: The trend line needs to be adjusted at any time as the price changes, and the demarcation of the market is not strong.
grid system
This system is used by relatively few people, but it is the template for computer transactions of many foreign investment companies. The grid system is to grid the disk, that is, to conduct quantitative transactions on prices.
This is more complicated to say. Simply put, it means dividing a price space equally.
The size of a quote is divided into 3 grids, 5 grids, 8 grids and 12 grids. Space the price equally, and then follow the grid to hold and enter the market. The advantages of
- are: quantifies profits and risks, and the profits are stable. The disadvantage of
- is: does not have a strong grasp of the overall direction of the market.
The above are basically some mainstream trading systems, and there are some other systems, such as cyclical resonance, indicator resonance, 123 structure, etc. I won’t talk about those.
The reason why mainstream trading systems are recognized by most investors is because each system has traders who use it very successfully.
But the same system and the same method are not suitable for everyone. The trading system is not all of trading. In addition to the system, trading also involves issues such as risk management, position management, and execution.
Moreover, the above systems are not perfect. While we see the advantages of the system, we also see the shortcomings of the system.
It can be said that there are very few successful people using these systems. It is not only a problem with the system itself, but also requires traders to have high analytical skills and adaptability. We define the above systems as complex trading systems.
So is there a simple and practical trading system?
You can grasp the market trends without racking your brains to calculate and analyze market trends. Below I will share with you my trading system. Although it is not suitable for everyone, I hope it can inspire you.
2
Problems that traders must face
Before explaining the specific system, let me explain a few problems. This is also a problem that any trader must face.
What does a complete trading system include?
The system is the basis for guiding us to make orders, so the integrity of the system determines the accuracy of the transaction. So what does a complete system contain, and what is its core?
This is something that any trader is concerned about and attaches great importance to. In fact, the contents of the trading system include the following aspects: risk control part , trading signal part , entry and exit principle part and profit expectation part Four parts.
- Risk control: Needless to say, the premise of any investment is that the safety of the principal comes first. Controlling risks includes three points: capital setting, position setting and stop loss setting.
- trading signal: This is the core part of our trading system. The signal probability given by the system is relatively high and the space is large. This is the prerequisite for us to make profitable transactions.
- entry and exit principles: also echoes the signal part. After we have the trading signals and formulate the trading strategy, we must have clear entry and exit principles when we start trading.
- Profit expectations: This is the missing part for many investors. Trading must be planned, the trading system must be evaluated, and reasonable profit targets must be set to ensure stable trading.
Why do different people use the same system to trade with different results? The purpose of the
trading system is to make our transactions rational and correct, and to eliminate sensibility and blindness, which requires strict discipline. Of course,
has a complete trading system. For different investors, the results are different. This is not a problem with the trading system itself, but caused by the differences between individual traders.
To be more specific, investors have different disciplines. Without discipline, and being influenced by emotions or external factors that lead to behavior that violates the trading system, even if you make short-term profits, you will fail in the long term.
The correct execution of the system is the only way to achieve stable profitability. Violating the trading system itself is violating the rational systematization of trading.
Signal judgment in the trading system
The other three parts of the trading system are all centered around the signal system. The signal system cannot have long-term stable correct signals, and there is no long-term stable profit. What everyone talks about every day is also the signaling system part.
There are two types of signals in the trading system: complex judgment and simple judgment.
- Complex signal system
None of the 6 mainstream trading systems we have seen above is simple. We regard them as complex signal systems.
A good signal system can give a stable signal. If the signal of a complex system is not stable enough, no matter how complex it is, it will be useless.
- Simple signal system
Simple signal system, as long as it can give stable trading signals, even if it is very simple, it can achieve stable results. There are several simplest signal systems we have seen:
indicator system: only uses one indicator to judge the market trend and signals, the common ones are MACD and RSI;
moving average system:
to 3 moving averages to judge the market trend. and signals;track system: BOLL an indicator to judge market trends and signals;
K-line system: simply relies on the K-line and K-line combination to judge market trends and signals;
of course there are other systems. The signal systems of
all have one thing in common, that is, there are few indicators, the signals given are simple and clear, and they basically look at each cycle, and there is no conflict between the signal anchor segment and the cycle in the same cycle.
I am also a user of the simple signal system. Those mainstream trading systems were eliminated one by one in the early days of my trading, and I finally chose the simple signal system and still use it today. Next, I will explain my trading system.
3
The four major aspects of the Single Dragon Trading System
My trading system is named: Single Dragon Trading System. The reason for this name is because the signal system part only has one moving average. When you look at the chart, it is very vivid, like a moving average. Dragon swims in the ocean of prices.
The trading system is also explained from four aspects:
Risk control
Maximum loss: The total loss shall not exceed 40% of the total funds, and the single stop loss shall not exceed 5%.
Maximum position:
0,000 USD account as an example, 2 short-term positions and 3 mid-term positions.signal system
trading indicator: EMA100 moving average
trading cycle: short-term 5-minute chart, mid-line 4-hour chart
trend judgment: The moving average is above the horizontal line for long, the moving average is below the horizontal line short
trading signal: long pullback to Go long near the moving average, and short positions will call back to the moving average to go short
Entry and exit principles
Entry principles: and other signal systems give a confirmed signal
Exit principles: Secondary rush high and low or moving average turning head
Stop loss principle: The moving average turns around and appears immediately.
Profit expectation
Short-term: html January profit expectation is 50%;
Short-term: Combined with the mid-line monthly profit expectation, 1 times.
will be explained in detail in conjunction with real-time market trends later.
3
Several key points of this system
Before explaining, let me explain what a horizontal line is. As the name suggests, the horizontal line is a straight line parallel to the horizontal plane, and the moving average is the average price line.
Everyone can see the trend of the moving average in the market, either upward or downward. Because the moving average reflects the average price, it is gentler than the price, and has the characteristics of inertia and continuity.
We judge the strength of the trend based on the upward or downward direction of the moving average. The reversal of the trend is the direction of the moving average.
To judge whether it is up or down, you need a reference, which is the horizontal line. Above the horizontal line is long, and below the horizontal line is short.
The specific operation is to mark the current position with a cross to see whether the moving average is above or below the level.
The following is a detailed explanation of the daily, 4-hour and 5-minute charts of gold:
The above picture is the daily chart of gold. It is obvious that the moving average is short, and the price will pull back to the moving average and then continue. Falling, now in the process of falling.
. Golden 4-hour chart
The above is a 4-hour chart of gold. The 4-hour chart is the long position of the moving average, and the price has also pulled back to near the moving average. We should go long with the trend, and we open a long order at 1127.
Let’s look at a 5-minute chart again. The 5-minute moving average has always been a short trend below the horizontal line. This also confirms that after the resistance on the daily chart was blocked, the price fell and there was a wave of small short positions. trend.
And the short trend has continued until now, and the moving average direction has not changed.
As a short-term trader, you have to wait for the moving average to give the direction of the long position and then enter the market to do long.
middle line 1127 Although we have entered multiple orders, stable operators can further use the 5-minute short-term trend to confirm before entering the market.
That is to say, wait for the 5-minute moving average to give the long direction, and then enter the long position. In this way, the waiting time is relatively short, and the basic entry trend will start quickly. Let’s wait for the 5-minute moving average to be confirmed first.
is the signal in the equal average chart and we enter the short-term market. The moving average is above the horizontal line, so just enter the market and hold long orders.
Many analyzes and predictions are self-predictions that are divorced from indicators, and they make wrong judgments on trends. The signal system does not need to be complicated. Just make a list for each signal. There is no need for complicated analysis and prediction.
Go long above the horizontal line, go short below the horizontal line, nothing else.
Advantages of the moving average: will not change trend as quickly as the K-line. The moving average is slow. Once a trend is determined, it will move out of a certain space according to the principle of inertia.
Of course, no trading system is 100% correct. As long as our system can guarantee 100% profit in the final result, this is the stable profit that everyone is talking about.
The basis for stable profits is a stable opportunity space. The moving average gives us such a space, and that’s it.
Don’t ask the market to provide both stable space and a very large space. Then there will be no need for the market to exist. We only need stable space.
Trends and shocks
The debate between shocks and trends is an enduring topic in the trading community. But for a few senior or professional investors, the debate between trends and shocks has long been a topic that should not be discussed.
Stable profits come from a stable space. There is room for trends within trends, and there is room for shocks within shocks. To correctly treat trends and volatile market conditions, we must fundamentally understand trading.
First of all, I have to ask you a question: What is the purpose of doing transactions? How to achieve this goal?
- The answer to the previous question is yes, the purpose of trading is to make profits, stable profits. Whether it is a profession or a hobby, profit is the fundamental purpose of our trading.
- The answer to the second question is not uniform. There are many ways to achieve stable profits, and everyone has their own methods and systems. It doesn't matter whether it's good or bad, as long as it achieves its purpose, it's good.
Here are some mainstream ways to achieve stable profits:
The prerequisite for making money through space is that the funds are large enough. For example:
An account worth 100 million US dollars. Open 10 positions each time. Take one direction and a large enough space. There is no risk. Even if you are wrong, you can add one or two positions at high and low positions and get a callback. Just came back.
The reason why large space is suitable for large funds is because the risk of low positions is zero. It takes several years for small funds to make 1% profit of large funds.
. Rely on quantityThe premise of making profit by quantity is to fast in and out, and make profits by small stop loss and small profit. This requires a higher winning rate to guarantee, but the risk is also very low.
Relying on positions to make profits is to create stable trading opportunities. It has nothing to do with the trend, as long as it provides stable trading space under certain circumstances. The risk is also very low.
The common feature of the above three profit models is that the risk is very low, but each model requires corresponding financial and technical support.
This goes back to the trend and shock issues mentioned at the beginning. Since it is a trend, the space for the trend is relatively large and has continuity. A shock is when the price moves up and down repeatedly within a range.
Trend and shock have become a contradiction. If you want to trend, you will end up in a shock, and if you want to make a shock, you will encounter a trend.Therefore, traders suffer repeated losses due to contradictions.
The reason for repeated losses is: Trends and shocks are not the scope of small and medium-sized capital operations, but the scope of large-fund operations in the space profit model.
The real trend is the trend of daily, weekly, and monthly, levels.
Most investors look for trends in the 4-hour chart or even shorter periods. This is just a wave in the general trend, and it is also the main reason why small and medium-sized funds are following the trend and losing money due to fluctuations.
From now on, if you hear discussions about trends and shocks, you can laugh it off. Because trends and shocks are not what you focus on and discuss. The profit models that small and medium-sized funds should pay attention to are quantity model and position model.
If you are not afraid of hard work, choose the quantity mode, but most investors certainly do not trade to have the transaction bind them. Therefore, the position mode can be selected.
There is no such thing as trend or shock in the position model. The key point to focus on is the stable space!
Whether it is a trend or a shock, a stable space is the basis for our stable profits, because profits come from stable opportunities and the cooperation of positions. As long as there is stable space, the goal of stable profitability will be achieved.
- Even if it is a trending market, for a space of 1,000 US dollars, we will get 20 US dollars.
- And the market is fluctuating. Even if there is only 30 US dollars of space, we can still get 20 US dollars of space.
These stable spaces are the basis for our stable profitability.
So, what about stable profit margins?
As traders, specifically ordinary traders, we do not have a comprehensive grasp of market information, and it is impossible to be detailed.
are like spectators outside the airport. We can see the plane running up and down, we can see the plane accelerating, we can see the plane take off. But we are not the captain, so we don’t know where the plane is flying or which route it is flying.
Onlookers outside the airport can determine the period of time when the plane walks up, runs, accelerates and then takes off, and the space that we traders can grasp is the stable space when the trend starts.
Because the market is like a plane taking off, after the startup speed accelerates, due to the effect of inertia, it will take a while even if it stops immediately. This period of time we determine is our stable trading opportunity.
I don’t care about how the trend will go in the future, or what the general direction will be in the future. This is not something I can decide, nor can everyone decide. We just need to know that no matter which way the market goes, it will give us these stable spaces.
Take the trend of gold as an example:
- If the short-term moving average is in the continuous short direction from yesterday to today, I don’t care about where it falls. Even if it falls to 5 US dollars, it is not my focus. As long as there is no signal for me to go long at the turning point of the moving average, I will not go long. The short position of
- has also moved away from the starting position of shorting, so it is not shorting either. Then we will wait for the moving average to confirm the turning point before going long.
- That is when the plane returns to the runway, that is when I re-enter the scene. Before we see the plane coming in and running away, all we need to do is very simple, just wait.
As long as the market exists, we can do this kind of opportunity repeatedly. I don’t care about the others, and there is no need to waste so much energy and time on guesses and conjectures.
The trend principle of the moving average is in line with the most basic natural laws: The law of inertia.
The reason for greed is that subjective will is imposed on the trend, and the reason for fear is that subjective will is not recognized by the market.
Therefore, we only deal with opportunities within our capabilities and only deal with stable profit margins. The result will only bring you stable profits.
Stable profits are much more meaningful than several large profits for gamblers. Stability and long-term This is the difference between traders and gamblers, and also the difference between objective trading and subjective trading.
The transaction itself is extremely simple. Waiting for the signal-entering the market-exiting the market, and then waiting for the signal-entering the market-exiting the market is just a repeated process.
The reason why many traders who have been traders or traders who have studied for a long time still cannot achieve stability is that the complexity of subjective consciousness makes trading complicated.
Many traders are trying to control the market or analyze the market to make the market trend consistent with their own subjective wishes or their own analysis.
The more you want to understand the market and control trends, the more you will fall into a quagmire of chaos, resulting in subjective trading, emotional trading, contrarian trading and even heavy position trading.
Maybe the final result is not to mention stable profits, but it is difficult to keep the principal. Loss or even liquidation will continue to consume your funds and even be in a rational state.
In fact, the transaction itself does not require using your brain, let alone your complicated analysis and judgment. The purpose of our system is to make the operation simple and wait for those stable and familiar signals, nothing more.
Stop loss settings are based on different systems, and the stop loss positions given are also different. However, no matter whether you are doing mid-term or short-term opportunities, the stop loss setting is basically based on the short-term stop loss.
In this trading system, stop loss is basically useless. This is why I have been accustomed to manual stop loss for so long.
Because it is following the trend, general sudden market conditions only appear in profits. Maybe we expected a profit of 4 US dollars, and the market suddenly started, and profits expanded rapidly, which only increased some profit margins.
- In the inertial market, stop loss is rarely used;
- In the contrarian market, no matter how superb the stop loss setting is, it only gives more funds to the market.
To solve the problem of stop loss, we must first solve the problem of trend trading.
Maintain the principle of inertial operation, and stop loss is basically useless; when operating against the trend, no matter how good the technology is, it is useless. Stop loss is based on the signal system. Therefore, the stop loss of this trading system has two points:
One of the principles of our trading is the inertia of the moving average. When the bull trend starts, it takes time and space to immediately turn into a short trend. It's enough for us to make a profit and get out, and there are very few situations where we need to stop losses.
. Take gold as an example, the maximum stop loss is 8 US dollars, which will be encountered in rare and special trends.The maximum stop loss is 8 US dollars. It usually appears when big data is released, which will instantly change the trend direction and give a larger trend space.
Large data can be avoided, such as non-agricultural data, interest rate hikes and interest rates. When these data are released, all you need to do is take a short position. This also avoids the unexpected stop loss of $8.
When people ask about stop loss, it’s like asking what will happen if the account keeps losing money? What will happen if the position is liquidated? What would happen if the market ceased to exist? Waiting for
similar assumptions, because I have not experienced it, and I don’t know how to tell everyone. The issue of stop loss may be an issue that everyone is more concerned about, but stop loss is rarely used, so it is impossible to explain it in detail.
Two basic stop loss principles can completely control and avoid risks. Because the system itself has solved the problem of stop loss, it can only explain so much.
4
Finally
Whether it is a trading problem or a stop loss problem, it is actually an operational problem, not a technical problem. These are all established rules, you just need to follow them and they are not complicated.
trading is based on the signal of the moving average and does not require brain analysis. Stop loss also waits for the signal of the moving average, and does not require brainstorming analysis.
Follow the picture to find the way, and the old horse knows the way. It doesn’t require the wisdom of , Zhou Yu, , or the talent of Zhuge Liang. It’s just about watching and doing.
This picture is very typical. It is necessary to say something: this picture is a typical short position turning into a long position, and then turning downward after a shock to become a short position.
Because there is no period marked on this chart, I can only make two speculations:
- If it is a mid-line opportunity in the 4-hour chart, and this happens, after the bull trend is confirmed, there will be at least 5 4-hour K lines, above the moving average, both There is room for profit and time to exit.
- If it is a short-term opportunity on the 5-minute chart, first look at the time period in which this signal appears.
- If it is not the European market or the US market, then there is no need to watch this signal. If this kind of moving average conversion occurs during the European and American trading time periods, no specific calculation is needed. Visual estimation is only 2 US dollars at most. If so many orders enter the market and the trend changes to a short position, then stop the loss, lose 20 points, and then make a short order on the backhand.
Because you obey the signals, the market will eventually reward you. In fact, there is no need to give some more examples:
- First of all: In terms of time, we filtered out the afternoon trading of the Asian trading and the American trading, which are the least active in the market, leaving the most active European and American trading. of morning trading.
- Secondly: The moving average signal gives us the determined trend direction, ensuring that our transactions are operating with the trend, and we are guaranteed to have a certain profit margin after entering the market.
- again: Even if the trend changes, just stop loss and get out. Although the probability of stop loss is very low, the stop loss principle is based on the moving average trend, usually 20 points, and the limit is 80 points.
- Finally: The trend changes, just operate according to the new trend direction. The entire transaction is completely point-and-shoot camera mode, no thinking is required, only simple execution.
As for various assumptions, whether the moving average will repeatedly convert into long and short, even if the market wants to do this, it cannot do it.
The moving average is the average price, just like a very heavy airplane. Once it takes off, the worst case scenario is an emergency landing. Who has ever seen an airplane take off and fall non-stop? Take off and fall...
This airplane can't do that, and the moving average is the same. It cannot be done because it does not comply with the basic laws of things - the principle of inertia .
This trading system is just one of the many methods and systems in the market. It advocates only one concept: simple and easy profits. The system's profit target is not high, and the monthly profit is no less than 50% to 1 times.
Although the system is named Shanlong System, it is just to sound nice. To put it more vividly, it should be a fool’s trading system. The only operation is to wait for signals, click the mouse, wait for signals, click the mouse... There is no need for any market analysis at all. , trend analysis.
Although it eliminates the fun of trading analysis, fun and subjective desire are not the source of profits. Although there is no fun in simple mechanical operations, getting real profits is the only purpose of trading.
The most important point is that trading discipline is the guarantee of long-term profits. Letting everyone trade together is also a constraint on everyone's trading behavior, which is conducive to the correctness and stability of everyone's trading behavior.
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