Well, the first thing you and any trader must define before starting to trade is the SYSTEM, which is based on two key pillars:
1. Technical analysis (TA).
2. Your own psychology (how you think).
The system is the set of steps or conditions that need to be met in order for you to take a trade while feeling psychologically comfortable. You can think of it as: “If price does this, I’ll do that.” Any system is based on TA concepts and indicators.
Examples of TA concepts:
- Elliott Wave Principle
- Profile/Orderflow (POC, value areas, absortion, etc.)
- Price action (ranges, deviations, sweeps, etc.)
- Liquidity
- Classical TA (supports, resistances, channels, wedges, etc.)
Examples of TA indicators: RSI, MACD, OBV, MA, EMA, etc.
You need to spend time learning technical analysis and exploring your own psychology in order to create your own system. You can combine the concepts and indicators you like to build a profitable strategy that also feels psychologically comfortable. There are a lot of X accounts out there teaching these concepts and indicators.
For example, this is how I executed my system on my latest CVX and CRV shorts (chain of posts, including plans: https://t.co/iYpQgg3lyV):
Price was forming an inverted triangle. When the A, B, C, and D waves looked complete:
1. Technical analysis: “If price touches the upper diagonal, I’ll short with SL above C. If price doesn’t touch the upper diagonal and breaks down, I’ll short with SL above E.”
2. Psychology: “The SL is so tight I’m a little scared it may get hit… Control yourself — it’s based on Elliott Wave rules. I want to recover the losses from my last trades, so I’m tempted to place the TP where I can recover everything… but wait, price may not go that far. Don’t be greedy. Take profit when you think the final downward wave looks complete. Slow and steady wins the race.”
Someone else might have placed the SL higher because they don’t feel comfortable with it being so tight, or taken profit much earlier because they were happy with smaller gains or afraid of giving them back. Another trader might have thought the potential profit wasn’t enough and ended up getting round‑tripped. Yet another might simply not like Elliott Waves and wouldn’t have taken the trade at all. And so on.
As you can see, a system is not just about TA — it involves a complex mix of thinking, beliefs, emotions… your entire psychology. That’s why I and many other traders always say you need to create your own system — the one that works for you and only you — because everyone is different, both in the technical analysis they prefer and in their psychological makeup, and that’s why I’ve also said trading is primarily a psychological endeavor, not an intellectual one.
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