Of course, it is necessary to have one. For me now, trading would be impossible without a trading system.

A trading system determines the steps and criteria for each of my trading operations. For a simple example, when a chart is placed in front of me, the trading system can tell me whether the next trend is bullish or bearish, and whether I should go long or short. Without a trading system, I would definitely rely on my feelings, which is no different from flipping a coin. Coupled with the drive of human nature, losses are an inevitable event.

Another very important function of the trading system is that it can build confidence in trading.

The biggest influence on trading is the fear psychology in the trading process.

For example, you may be afraid to enter a good trend, fearing that the order is wrong and will be stopped out. After finally gritting your teeth and entering, the order becomes profitable, but you may exit prematurely due to the fear of a market reversal and the profit is given back. You make a little when you win, but lose a lot when you lose.

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However, with a trading system, these problems can all be solved.

The trading system will guide you through all trading actions, when to enter, when to exit, how much to buy, how much to sell, how much profit can be made, the trading system has already arranged.

A qualified trading system must have been tested extensively, including reviewing many years of historical market trends, including long-term simulated trading tests. You know the performance of this trading system in many years of historical market trends, and you also know how much profit this trading system can bring you each year. So when you encounter consecutive stop losses, or market reversals, or even sudden black swan events, you will not panic, still taking profits when you should, and stopping losses when you should.

In the trading system, you are very familiar with the system's success rate and profit and loss ratio. You know that there will definitely be some orders that will be stopped out in the trade, which is a very normal performance. You will not feel extremely anxious because of one or two trades, nor will you be afraid to enter because of the fear of stopping losses, and you will not have this strong fear emotion when holding positions.

The trading system must include very strict money management. You know that the system may have losses, or may have consecutive losses for a period of time, but there is absolutely no risk of blowing up the position, which will build a great psychological advantage and improve the execution of trading.Having a trading system equates to having a method for trading profits. With a method, one gains more confidence, which is more conducive to execution, forming a virtuous cycle, and profits naturally follow.

It's like a chef; when he has a recipe in mind, no matter how bad the dish turns out, it's still acceptable. However, without a recipe, not knowing what to do next, the quality of the dishes will be inconsistent, and the restaurant won't be able to survive. Therefore, only if the restaurant survives does the possibility of optimization exist.

So, as a trader, how can one possess their own trading system?

1: Learn at least three to five types of technical indicators and thoroughly study these pieces of knowledge, including the usage of these indicators, their strengths and weaknesses, and what kind of market they are suitable for, all must be thoroughly understood and mastered.

2: Construct a prototype of a trading system with the learned technical indicators, following the four basic frameworks of a trading system: confirming trends, entry points, stop-loss and take-profit levels, and money management.

3: Test this prototype of the trading system in a backtesting software, perform statistical analysis of the system, such as how much profit and loss, what the success rate is, what the profit-to-loss ratio is, and how it performs in long-term historical market trends, etc. Analyze this data, then optimize and modify the trading system, test it further after modifications, derive more data, analyze again, and repeat this cycle multiple times until a satisfactory trading system is achieved.

4: Test this trading system on a demo account, ensuring appropriate capital and execution, to observe the system's performance. If it performs well over the long term, one can then proceed to live trading.

Actually, establishing a trading system is not difficult; the challenge lies in the subsequent execution. Therefore, the steps I mentioned are indispensable, and the performance in a demo account may be discounted by 30% in live trading because human factors must be considered.

Either you engage in value investing, or if you are doing technical analysis, you must have your own trading system; otherwise, the consequences of random trading are unpredictable.