The trading system is one of the most important factors for profitable trading. Without a quantified trading system, you can not make money out of the market, and hence you should develop a well-researched trading system before trading with large capital.
Our human mind is structured in such a way that it tells us or instructs us to do exactly the opposite of what one should do to become a profitable trader, and our motive is to control our mind, and for this, we need a solid trading system that instructs us to do what is right at that point of time. So, that is why your view will not make you money in the long run, but your trading system will; hence, following your trading system is far more important than your view of the market.
When you have a strong view on the market, and you hope that your view will go right irrespective of other circumstances, then indirectly, you are gambling. Whenever you take a trade just because of your instincts and not because of your logic and system, you gamble. Unfortunately, many traders commit this mistake and fail to understand the importance of the trading system.
When you trade anything other than your setup or plan, indirectly, you are trading because of your emotions. So, it is important to follow one particular trading system consistently for a long time because that makes you a successful trader.
Regardless of the trading technique you choose, it is always crucial to keep your capital risk under control. You’re probably doing something incorrectly if the average number of your lost trades exceeds the average number of your winning ones.
The 2% rule in trading, which stipulates that you shouldn’t ever risk more than 2% of your whole trading account on a single trade, including brokerage and other taxes, is a well-known trading principle.
For instance, you shouldn’t risk more than Rs. 2,000 on a single trade, including brokerage and other charges, if you are trading with Rs. 1 lakh capital. So, this is the most basic but effective Risk Management rule you should consider while making your own trading system.
The market is surely uncertain, but there is one certain thing in the market, and that is the market does not care about you. Whether you are making money or losing money, whether you are rich or poor, the market doesn’t make any difference, but after knowing all this, many people still get emotional about their trades, and that is why they get frustrated and allow themselves to be in control of markets. You will not become a profitable trader until you develop the right trading psychology.
Once you learn how to trade what you see, not what you think, then you are on the verge of becoming a profitable trader because once you do that, then you are not allowing markets to control you, rather you are controlling yourself and your emotions with the help of your trading system.
These are the important reasons why you should have a trading system. I hope that through this article, you were able to understand why a trader needs a well-quantified trading system to become profitable in the long run.
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If you want to know more about Intraday Trading Strategies you can refer to our previous blog on 10 Best Intraday Trading Strategies.
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