Let’s describe the most common trading rules schematically. I’ll take the liberty to do so, and please don’t judge me too harshly.

Select a Financial Instrument: Look at several time intervals (timeframes). For simplicity, let’s call them large and small. On the large timeframe, we observe the overall or global trend, and on the small timeframe, we look for a “more precise” entry point.

Choosing a Signal: The next step after selecting the interval is choosing a signal. Generally, I would divide signals into three categories:

• • Rebound or break out of a level

  • Indicator readings

  • Some cyclical or wave theory

Additionally, movements can be impulsive or corrective. There is also a market phase called stagnation, where the market seems lost and unsure of whether to go up or down. The signal from the chosen category works either on the impulse or correction; some categories work well specifically in this unrecognized phase. No indicator would indicate in real-time that phases have changed. Therefore, concepts like “false breakouts” or “stop-hunting” exist.

Planning System: Finally, a trading strategy should include some planning system that defines the profit-to-loss ratio within a specific proportion.

It seems like I didn’t miss anything.

Such systems certainly exist and can be tested on historical data to achieve acceptable results. In theory. In practice, I don’t know of any working systems over a period longer than five years.

The reasons, in my opinion, are several:

• Unclear criteria for choosing intervals

• How to resolve contradictions if the same signal gives opposite indications on different timeframes

• Attempting to secure the system by introducing additional signals leads to significant delays in specific actions and too high possible risks

• How to resolve contradictions between different signals on one timeframe

All these drawbacks, in my opinion, stem from one simple reason — we are trying to predict where exactly the price will go. Hence, the trading system becomes disjointed, delayed, and very uncertain at any given moment.

Again: the reason is the wrong goal setting.

In this case, analytical forecasts come to the forefront, providing bilateral recommendations. If you want to buy, here are the reasons to do so, and if you want to sell, use these reasons. Such analysis is always in the plus. Over time, the price will reach one of the targets or remain within the margin of error. But a trader is not an analyst, and they need a holistic picture.

The word “holistic” is key here.

Nature is arranged so that all movements in it are cyclical: the water cycle, the food chain, yin and yang. One flows from the other. In every moment, you know exactly what is happening and why. You should create a similar market picture for yourself. There should be no dark or gray areas in the market. I have taken the hypothesis of an efficient market and slightly modified it for trading.

There are moments when the market goes up without making downward movements, there are moments when it makes upward movements that we can profit from by buying, but their length is insufficient to profit, there are moments when the market goes both up and down, sufficient to profit in both directions, there are moments when we can profit from selling, but there are no opportunities to profit from buying, and finally, there are moments when the market goes down without even providing an opportunity for upward movement.

That’s it! In less than ten lines, I described all possible market movements. Certainly, you also need to consider your behavior model when the market goes contrary to your expectations. This situation should not be endured in loss, but you need to learn to see when it ends.

The signal should be applied, and it should be as simple as possible. A color change in the candle would suffice. Although I use an even simpler signal. Then, practice position size management, which is the primary and more challenging task. Solving it without adhering to a chaos ideology is pointless!

When there is an established market dynamic, everyone makes money; problems begin when the dynamic changes. Therefore, it is crucial to be able to work against the current price movement, so to speak, against the trend. This should be part of your rules. Essentially, the rules should ignore the classic concept of a trend. There should be a price movement over a certain period. And you should be able to close this period in the positive.

If you don’t like what I wrote, you can always return to the theory of regularities, and if you’re lucky, you will leave the market before the dynamic on which your signal is based ends.

The choice is always yours.

Respectfully…