This wasn’t an accident; I rarely stumbled across any big epiphany. It took me literally years to assemble my trading system. I read countless books, watched over 10,000 hours of YouTube videos, and experienced tough lessons firsthand. I wanted to learn how other traders not only survived this game but also became consistent with their chosen styles and systems. After noticing some recurring themes, tips, and recommendations, I started assembling a solid foundational trading system for myself.
Everyone is different, and what works for me might not work for you. This is an ongoing process for me, and I’m a constant tinkerer. About 90-95% of my system is rock solid and probably won’t change much if at all. The other 5-10% is where I still take liberties to nip-tuck as I learn more and as the markets throw me new unexpected curve balls. Staying flexible is crucial.
My first tip is to make sure that your system has unshakeable concrete rules and guidelines that you always adhere to and never change. It’s important to remain pliable on certain aspects of trading too, but on your core rules, they should never be bent, broken, or altered. As I fine-tune this process, I find that about 5-10% of my system, I reserve the right to alter or dink around with. The rest, I try to keep as solid as a rock.
When I started out, I just wanted to know what the pillars of trading were. What were the main rules not to break? What did I need to adhere to in order to survive over the long term? The main goal in the beginning is just to survive. So I needed to know how I could participate in the markets to learn, but not get destroyed and blow up in the process. So my first pillars that I put in place were circuit breaker-like stops that I had to place to save myself from myself. The first rules were 2 red trades in a row, and I’ll be done for the day. Two red days in a row, stop and figure out what’s going on. Tailor this to fit you, but you get the idea.
Stopping bearish momentum against my account was number one for me. Another massive pillar in the system was how to manage risk. I needed to have at least a 2:1 risk-to-reward ratio before jumping into a trade. After a while, I got better at finding low-risk, high-reward setups, and that 2:1 was laughable. I was going for at least 3 or 4 to 1.
The third biggest pillar of systematic importance was getting the money rotation and being able to track that. I figured out right away that I had to follow the money. Understanding sector rotation was key. Follow those gigantic whales and ride their waves. Rising tide raises all boats, right? So, I knew I had to know where the tides were flowing and then make sure I wasn’t going against the overriding momentum. Something I put the highest priorities on still today. I won’t put on a trade if I don’t know which way the overall markets are favoring. If things are hectic and super volatile and unsure, I will just wait to get confirmation.
The final of the 4 biggest pillars within any solid trading system I would say would be how to control and/or actively monitor your mentality. How is your mind and attitude holding up? Take a quick Apgar to check up on yourself. Implement some sort of quick self analysis and incorporate that into your daily routine somehow. Its like taking your mind’s temperature. Somedays its best to just walk away and not trade. Which of course is really hard to do if you feel like the market is presenting many opportunities that particular day. But the dude abides, right? Gotta listen to the system. Basically, you must be a slave to the system. Obedient to the rules and guidelines that you put in place for your own long term benefit. If you put down rules but cant follow them, then you need to work on your integrity as a trade…but thats a different article for a different day. For now, if you are a newer trader just focus on building yourself a foundation that you can count on no matter what the markets are doing. Its design should be to put in place to keep you safe, thats its main purpose. To perpetuate forward momentum within your account and to help stop negative momentum against your finances. Make the system work for you. Create a system or set of guidelines that protects you from yourself and your worst tendencies so you can live to trade another day.
