The secret to successful futures trading is finding the right trading system for you

The trading win rate, trading frequency and profit-loss ratio constitute the "Mundell impossible triangle" in the field of futures trading. Investors need to find a balance according to their personality characteristics, operating habits, account funds, and risk tolerance to create a trading system that suits them.

Unknowingly, he has been a father for many years, and the children in the family have also grown up to be elementary school students wearing red scarves. Since she started school, the amount of homework has increased with each passing year, especially when she was tutored to do arithmetic training. A lot of practice not only makes the author headache, but also makes the child feel distressed. We all know that the original intention and original intention of the teacher is to let the children play the basic skills well and learn more solid knowledge. We hope that through repeated practice, children can develop the habit of fast computing, so that they can complete the calculation in a short time and improve the accuracy. But in reality, it often backfires, because children are naturally playful, and most of them do not have the awareness of active learning. Even if they are repeatedly persuaded, they are unwilling to practice more. In this case, parents began to fall into the vicious circle of "Mundell impossible triangle" - unable to help children achieve fast, accurate and high computing results with a small amount of practice.

The "impossible triangle" theory was proposed by the economist Mundell in the 1960s. It describes the contradictory relationship between independent monetary policy, fixed exchange rate and capital mobility. The content of the theory is that for a country in the process of economic development, there are three points that can never be achieved simultaneously, namely, a fixed exchange rate level, free international capital flow, and an independent monetary policy. In other words, three goals cannot be achieved at the same time, and one must be sacrificed to satisfy the other two. If a country or economy allows free capital flow and requires an independent monetary policy, it is difficult to maintain the stability of the exchange rate; if it requires exchange rate stability and capital flow, then it must give up the independent monetary policy.

According to the "Mundell impossible triangle" theory, a country can only choose the following three policy combinations between free capital flow, monetary policy independence, and exchange rate stability:

First, to maintain the free flow of capital and the independence of monetary policy, it is necessary to sacrifice exchange rate stability and implement a floating exchange rate system. For example, in Brazil and Canada, this is generally the case. Under the condition of free capital flow, frequent domestic and foreign funds will lead to instability in the balance of payments.

Second, maintaining exchange rate stability and the independence of monetary policy requires restricting the free flow of capital and imposing capital controls. For many developing countries, especially those that have experienced financial crises, relatively stable exchange rates help maintain external economic stability, while monetary policy independence is conducive to controlling domestic macroeconomics.

Third, to maintain the free movement of capital and exchange rate stability, monetary policy independence must be relinquished. For example, in Argentina or many European countries before 2000, when capital flows freely, the effect of monetary policy under a fixed exchange rate system is offset by the changes in capital flows it triggers.

Although "Mundell's impossible triangle" is a very famous theory in the field of economics, its essence reflects the contradictory relationship between opposition and unity behind everything in the world. No one can have all the benefits, so it is necessary to know how to choose. In fact, in the field of futures investment, there is also the phenomenon of "Mundell's impossible triangle".

Industrial foreign exchangeIt is believed that, as a futures investor, its ultimate goal is to obtain positive expected returns, and this big goal can be decomposed into three small goals, namely, trade win rate, trading frequency, and trading profit and loss ratio. These three small goals also constitute the "Mundell impossible triangle" in the field of futures trading. In other words, under the premise of maintaining positive expectations, two small goals can be adjusted at the same time, and another small goal can be abandoned.

Well, first of all.In terms of trading winning rate, without considering other factors, the most intuitive and effective way to improve the winning rate is to go to the end every time you lose money, and you will not be out if you don't make a profit. In such a trading mode, the trading winning rate must be very high. However, while improving the trading winning rate, the two goals of profit-loss ratio and frequency will inevitably be affected. Because if you only improve the winning rate, you can filter out some non-trading prices through research and analysis, but this will increase the trading time and cost for investors. At the same time, in order to improve the winning rate, you need to cash out all the profits immediately, but not the losses, which undoubtedly makes investors give up the profit-loss ratio voluntarily.

Secondly,In terms of trading frequency (that is, minimizing the holding time), if traders aim to reduce the time cost and need to reduce the average holding time cost, then profits cannot run freely. Because the free running of profits requires a lot of time cost and patience, it will limit the profit-loss ratio. At the same time, this also indirectly affects the winning rate. It is extremely challenging for non-professional investors to maintain a relatively high winning rate in frequent trading times, and even many professional investors cannot complete it. Because participating in trading all the time will undoubtedly increase the fee expenditure, increase the number of losing trades, and consume a lot of energy. Not to mention that ordinary investors do not have the conditions for full-time trading, even full-time traders are difficult to bear.

And finally.In terms of trading profit and loss ratio, increasing the profit and loss ratio is to maximize the average profit. The most direct way is to increase the time cost of holding the position. At the same time, the loss order is immediately positioned squaring, and the profit order is retained for a long time. Obviously, this operation not only sacrifices the trading win rate, but also increases the trading time cost. Because frequent trials and errors and waiting for profit growth will undoubtedly reduce the trading win rate and increase the trading time cost.

At present, it is difficult for even very successful investors to maintain a high winning rate, maintain a high profit-loss ratio, and at the same time make the time cost very small. It can be said that investors cannot break the "Mundell impossible triangle" in futures trading. Therefore, on the premise of ensuring positive expectations, investors can only seek a balance point in this triangle area, which can not only satisfy the mutual substitution of the three, but also achieve positive returns.