Today, let's discuss the third stage in the growth process of professional traders—The Right Path. This is a very important phase because it serves as a bridge between the previous and the next stages. During this stage, it requires every trader to have sufficient insight and the ability to engage in deep thinking. This stage is filled with immense challenges for us.

It is akin to walking in the dark, where we not only need the ability to explore independently but also the capacity to quickly find our direction. Therefore, in this stage, there may be many places where we could get lost.

Third Stage: The Right Path

Now, let's address several important issues specific to this stage. First, we will discuss how long this stage typically lasts; second, what the core issues we need to resolve in this stage are; third, we need to understand the common mistakes we often make in this stage, and what these errors actually look like; fourth, we need to know where our bottlenecks are in this stage; and fifth, how we can break through these bottlenecks.

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We will now share some of my experiences from the growth process in relation to these five questions.

1. How long does this stage typically last?

The first question, about the duration, I believe varies from person to person, but on average, it also takes about two to three years.

This is because the issues that need to be resolved in this stage are quite complex. It requires the establishment and verification of one's own trading system, which is a process that necessitates repeated trial and error. If your approach is incorrect, the duration may be longer, and the cost of trial and error could be higher. This is the basic situation of this stage.2. What is the core issue we need to address at this stage?

At this stage, we are actually building upon the foundation of the second stage—enlightenment in trading, to deepen our research into trading. We all know that in the second stage, we have identified the key factors for profit, which are mainly to address the issues of risk-reward ratio and probability.

The resolution of these two issues requires us to construct a trading system, because only through a trading system can we recognize trading signals, and only then can we possibly find direction, entry and exit points, and stop-loss levels. By establishing the logical relationship between direction determination and entry and exit, we can meet the demands for probability and risk-reward ratio.

① Standardization of the trading system

Therefore, the first core issue at this stage is to establish a complete trading system. To delve deeper, you may not only need to establish a trading system but also a comprehensive trading system.

A trading system typically includes a trading opportunity recognition system, risk management system, trading execution system, and capital management system. So it is not just a simple issue of a trading system; at the same time, we must also be able to standardize the trading system.

Why is standardization necessary? It is related to the intrinsic requirements of our trading.

Because trading is actually assessed by the probability of our trading results, and we also look at the risk-reward ratio. Therefore, on these two points, we need to standardize our trading system.

What is standardized processing?

This is actually the issue of uniformity in our trading signal recognition. For example, we need to implement our trading system because we need to conduct specific trades. At this time, you must have corresponding standards for your direction determination, right?The standard in question must be implemented in terms of the indicators you use, the drawing standards you apply, or the theories you employ to standardize the issue of direction determination.

For instance, in direction determination, it requires specific standardized signals to occur. Second, your entry point, your exit point, and your stop-loss point all require standardized identification.

Take my entry point as an example; I need to identify it through certain signals, whether it's a golden cross or a death cross, or perhaps the golden ratio, or our determination of resistance and support levels, etc. The position needs to be standardized because once the position is standardized, we can then possibly achieve our desired profit-to-loss ratio, right?

This is an intrinsic requirement of our trading, which necessitates that the sample data you provide is sufficiently abundant, with a large amount of data for statistical analysis, so that we can observe the changes in our probability and profit-to-loss ratio.

Therefore, this requires that when you trade, your entry and exit decisions are made entirely according to the same pattern or the same set of criteria, the same signal occurrence standards, so that we can possibly generate the concept of probability.

Otherwise, if you enter the market according to different standards each time, our statistics will be meaningless, meaning that the probability of your overall trading results after testing will not be established.

The condition for the establishment of our probability is that all such trading samples are conducted according to the same trading standards; we call these collected samples valid samples.

Thus, in this regard, this is the first core issue we address at the stage of the right path, which is the standardization of your trading system, or more deeply, the standardization of your entire trading system, which is indeed challenging.

② Testing the System

Having a trading system merely signifies that we can identify trading opportunities, but it does not guarantee that you will be able to trade according to your recognized signals. At this point, you need to construct a relatively fixed, preliminary verifiable execution system, which can also be referred to as a testing system.There are several ways to test a trading system that everyone can refer to. The first one is your personal fixed trading pattern, which means you personally engage in trading. This is relatively difficult because it involves the issue of uniformity in trading behavior.

We all know that as individuals in trading, we are bound by human nature, and this actually poses a high challenge to the stability of your trading. Therefore, it is necessary to correct our trading behavior sufficiently.

Fortunately, we are testing, so we can use a low position to test, right? So it is relatively controllable. This is the first method, such as testing by personally trading.

The second method is EA programming. If your trading system is not complex and can be recognized through EA language, then we can program it, perform backtesting, and then test it in a live account. Finally, we obtain our probability and risk-reward ratio, which is also feasible.

The third method is team trading. If you are an institution or have your own trading team, team trading is certainly a better choice, right? If you are not an institution and want to achieve the testing effect of team trading, it is very difficult.

All three can ensure that we conduct trading tests at this stage, and the specific fixed testing methods can guarantee that we complete this action. Therefore, at this stage, it is an important standard to initially build a system that can be tested.

Only by solving these two issues can we address the ultimate core issue, which is the evaluability of trading results, referring to the main probability and risk-reward ratio.

OK, these two issues are the core issues that we need to mainly solve at this stage. In the next section, I want to talk about what kind of mistakes we are prone to make in the stage of the right path.

Well, that's all for today's content. Welcome everyone to follow, like, and share!