In order to survive in the foreign exchange market for a long time and maintain stable profits, it is necessary to establish an effective trading system based on understanding the market.
So, what kind of system is an excellent system?
Some people may answer: There must be a complete risk control system, which can correctly analyze the market, can help traders avoid the weakness of human nature, and can achieve low risk and high return...
In fact, the system varies from person to person, and there is no right answer.
What I bring to you today are the eight classic trading systems recognized by the world's trading circles. Most of them are circulated in the classic works of trading masters and are well known to everyone. Even some of the world's top foreign exchange masters often use them for trading!
01Turtle trading system
The first is the most classic turtle trading system, which was introduced in the previous article.
Famed financial speculator Richard Dennis wanted to figure out whether great traders were born or made.
To this end, in 1983 he recruited 13 people and taught them the basic concepts of trading as well as his own trading methods and principles. The Turtles became the most famous experiment in the history of trading, because in the following four years, the Turtles achieved an average annual compound interest rate of 80%.
Dennis proved that a simple system and rules can make a person with little or no trading experience into a good trader.
Richard Dennis
Core trading philosophy:
Enter when the price breaks above the 20-cycle high.
Exit when the price falls below the 10-session low.
System one:
Entry: Short-term system based on 20-day breakthrough (the price exceeds the highest or lowest price of the previous 20 days)
Exit: 10-day low for long positions, 10-day high for short positions. If the price action diverges from the position to a 10-day breakout, all units in the position are exited.
System two:
Entry: Simpler long-term system based on 50-day breakouts (prices exceed the previous 50-day high or low)
Exit: 20-day low for long positions, 20-day high for short positions. If the price action diverges from the position to the 20-day breakout, all units in the position are exited.
Because the turtle trading system is extremely classic, it is very popular among the public, and many trading masters have derived many turtle-style trading systems based on it.
02 Larry Williams Gap Trading System
Larry Williams is the founder of William Index, a famous American futures trader, writer, column editor, and asset management manager. He is the author of the book "Short-term Trading Secrets".
The winner of the Robbins Cup Futures Trading Championship turned $10,000 into $1.1 million in less than 12 months.
larry williams
In a sense, the gap trading system is a psychological trading system, mainly to measure the price sudden change caused by excessive emotional reaction.
Basic idea:
Its basic trend is that in a downward trend, the price fluctuates around the lower end of the box-shaped range for 5 to 10 days, and then opens sharply lower and falls below the trend line. The selling pressure is extremely high. If it then rebounds to yesterday's lowest price , indicating that the market's energy has reversed, and another sharp rally is ready to go.
System buying machine rules:
The closing price is 4% lower than the five-day average price, ensuring that the signal occurs in a downtrend;
The opening price is 1% lower than yesterday's lowest price;
The closing rebound was above yesterday's lowest price.
03 Victor Sporandi 123 Rule Trading System
Victor Sporandi, a professional securities trader and fund manager, was hailed as the "Terminator of Wall Street" by Barron's Finance magazine. He has made investment profits for 12 consecutive years without any loss in any year.
Victor Sporandi
Identifying and following trends is the pursuit of every technical analyst. Victor Sporandi, based on the Dow Theory, made trend identification a complex and arduous task.
Simplified to the 123 rule:
First the trend line is broken;
An uptrend is no longer making new highs, or a downtrend is no longer making new lows;
In a downtrend, the price breaks above the previous rally high, or in an uptrend, the price crosses the previous short-term retracement low.
The basic idea is:
If, during a downtrend, the price has reached a new low without continuing to fall, and re-escalates above the previous low, the trend may reverse.
Although the 123 rule is simple and effective, its entry point is late, and a considerable market has usually been missed. Therefore, Victor further proposed the 2B rule, whose essence is to observe the phenomenon of false breakthroughs.
04 Tom DiMarco TD Price Range Trading System
Tom DiMark, executive vice president of SAC, CPO partner of bond fund manager VanHosington, special advisor to $4 billion hedge fund manager Leon Kubman, one of the largest individual traders on the Chicago Mercantile Exchange Francesca's former partner, served as a consultant to large financial institutions including Soros, Morgan Consortium, Citibank, Goldman Sachs, IBM and UnionCarbide.
Tom DiMarco
Tom DiMarco believes that the key is not whether it is overbought or oversold, but the time when the indicator runs in the overbought and oversold period.
In order to accurately measure the situation of buying and selling pressure, he proposed the creation method of TD DeMarker II indicator, which links all price movements with determined supply and demand levels.
The value of the numerator is composed of two buy pressure metrics. In the 8-bar chart, add the difference between the highest point of the day minus the closing price of the previous day to the difference between the closing price of the day minus the lowest price of the day. If the highest point of the day is lower than the closing price of the previous day, then the buying pressure part is assigned a value of 0.
The denominator consists of the 8-day numerator value plus the respective sell pressure value, which consists of two metrics. The first part is the difference between the closing price of the previous day minus the lowest point of the day. If it is negative, the selling pressure part will be given a value of 0; the second part is the difference between the highest price of the day minus the closing price of the day. Add, then add the resulting value to the value of the numerator to get the denominator.
05 Lawrence McMillan Volatility Trading System
Lawrence McMillan, an option trading expert, was a senior vice president at ThomsonMckinnon Securities, in charge of stock arbitrage trading. Author of "Option Strategic Investment" and "McMillan on Options".
Volatility refers to the speed of price change, which can be calculated using the standard deviation formula, and historical volatility is compared according to different lengths of time, such as 10 days, 20 days, 50 days, and 100 days.
System buying machine rules:
Historical volatility is arranged in a bearish pattern, that is, the volatility range is getting narrower and narrower, suggesting the calm before the storm;
The time to calculate historical volatility is 5, 10, 20, 30, 100, and find its standard deviation;
The indicators of ac and ao decreased for 5 consecutive days.
06 Martin Pringer Oscillating Trading System
Martin Pringle, one of the most influential leaders in the field of technical analysis today, has won the Canadian Technical Analysis Association Jack Frost Memorial Medal.
System concept thought:
No extreme, when the price is at an extremely volatile price, the reversal is imminent. This idea can also be used in combination with trading volume swings to verify the converging effect of the two and improve the odds of winning.
System mechanical buying rules:
The ratio of the closing price of the day to the 28-day moving average is less than -10.
07 Constance Brown Derivative Oscillator Trading System
Constance Brown, a master of securities analysis, fund trader, and founder of the aerodynamic investment website.
System concept thought:
To perform triple smoothing on the RSI Relative Strength Index, the calculation steps are as follows:
Calculate the 14-day RSI indicator;
Calculate the 5-day average of the 14-day RSI indicator;
Calculate the 3-day average of the calculation results in step 2;
Find the difference between the calculation results of step 2 and step 3, and display it in a bar graph.
08 Dolphin trading system
Core concept: trade with the trend, place an order on the right
By using the moving average and MACD trend indicators during the trend judgment period to determine the trend-reaching trading period for homeopathy trading;
Orders are placed on the right side of the trading period by placing orders at the golden cross and dead cross of the KD indicator during the entry and exit period.
1 Trading session selection rules
Choose the main trading session according to your personal trading habits.
The principle of judgment is that the trading period you are good at is the main trading period to be selected, the previous period of the main trading period is the trend judgment period, and the next period of the main trading period is the entry and exit period.
2 Trend Judgment Rules
Use the MA26 moving average and MACD in the trend judgment period to judge the current trend of your main trading period:
The price is above MA26, MACD Value> Signal>0: the trend is a bull market, go long;
The price is above MA26, MACD Signal> Value>0: the trend is rising and falling or rising adjustment, close long positions and try to short;
The price is below MA26, MACD Value<Signal<0: the trend is a short market, go short;
The price is below MA26, MACD Signal<Value<0: The trend is a downward rebound or a downward adjustment, close short positions and try to go long.
The above are the eight most classic trading systems in the world.
Finally, if you want to trade with the above-mentioned trading systems, it is best to conduct simulated trading tests first to find the most suitable one for you. After all, there is no best trading system, only the most suitable trading system for you.
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I hope this article can make foreign exchange traders get out of the confusion when they are in confusion. Old rules, if you haven't understood it, please bookmark it first! Welcome to leave a message to communicate with the editor!
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