I’m preparing to update some content on trading that I regularly study. Firstly, it’s to consolidate my learning; secondly, to share with everyone and hopefully help those who need it. Next, I’ll be updating some core elements of professional trading strategies and advanced technical analysis. It’s divided into six parts with extensive content—those interested, save this. The six parts are as follows:
Part 1: Six Dimensions of Professional Trading Strategies Part 2: Core Architecture of Trading Strategies Part 3: Core Concepts and Tools of Technical Analysis Part 4: Key Elements of Risk Management Part 5: Trading Psychology Part 6: Operational Logic and Trading Plans
This article is Part 1.
I. Amateur Strategies vs Professional Strategies
Amateur strategies typically contain only some entry and exit techniques, lacking the core principles necessary to maintain strategy stability. Although these techniques may work in the short term, their loose structure and unclear direction make it difficult to achieve long-term consistency.
Due to a lack of deep reflection on trading philosophy, amateur traders often repeatedly use these “tricks,” ultimately falling into losses and frustration.
Professional strategies, by contrast, are different. They consist of multiple sub-strategies, covering multiple analytical dimensions with rigorous logic and stable structure. More importantly, they not only provide execution rules but also provide a systematic framework for problem-solving, helping traders address the inevitable challenges in trading.
Therefore, we should strive to build a professional and sustainable trading system, rather than relying on scattered techniques.
II. Six Dimensions of Professional Strategies
- Trading Principles (Foundational Principles): This is the core of the strategy, guiding the operation of all other dimensions. We will analyze these principles in depth one by one in future lectures.
2-4. The Success Tripod: The next three dimensions constitute the so-called “Success Tripod.” They are interdependent and indispensable. Just as a tripod collapses if it loses one leg, ignoring any one dimension will cause the entire strategy to fail:
- High-quality Technical Analysis: Identifying market opportunities and structure.
- Robust Risk Management: Controlling losses and optimizing returns.
- In-depth Trading Psychology (Behavioral Economics): Maintaining execution consistency and managing emotions and biases.
The intersection between these three is critical: - Technical Analysis + Risk Management ⇒ Produces good trading positions (i.e., rational entry). - Technical Analysis + Psychology ⇒ Helps traders remain calm under pressure, especially near market turning points. - Risk Management + Psychology ⇒ Ensures trading operates within the psychological comfort zone, improving strategy sustainability.
5. Operational Logic: A set of available tools and methods designed to enhance execution efficiency and quality, helping traders better handle various trading scenarios.
6. Trading Plan: A specific set of rules and execution guidelines aimed at keeping traders on the right track at all times. Given that the human brain is inherently prone to emotionality and discipline deviation, the importance of this dimension cannot be underestimated.
Key Point: Professional strategies are built on six closely connected dimensions, not only focusing on market analysis but also emphasizing structure, execution, and sustainability.
These dimensions collectively build a complete system, enabling traders to maintain an edge in complex and volatile markets.
- “The intersection of technical analysis and risk management produces the principle of good trading positions. In other words, it is impossible to trade using only technical analysis, as the approach to risk would become distorted and unrealistic. On the other hand, using risk management without technical analysis would leave traders at a loss, because we need to trade near market reversal points, and our only tool is technical analysis.”
- “The intersection of technical analysis and trading psychology is also very important because high-quality technical analysis enables traders to trade near market reversal points. Technical analysis plays an important role in reducing the psychological pressure of having to take unnecessary risks.”
- “The intersection of risk management and trading psychology is also crucial in practice. Correct application of the mathematical guiding principles of risk management enables traders to operate within a relatively comfortable margin of error. This relatively comfortable state has enormous advantages for long-term sustainability. It is a fundamental element of sustainable and consistent trading.”