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To make money from stock trading, one must have their own trading model.

However, a trading model is not something one is born with, and no one can suddenly come up with a super profitable model. Most models are gradually perfected through continuous trading.

Determining one's own trading model and how to perfect it is a very complex process.

To determine a trading model, it is important to avoid fatal issues with one's trading model.

Perfecting a trading model mainly focuses on optimizing the success rate of the model.

In the stock market, there is no perfect profit model, which means there is no 100% chance of making money.

Even some arbitrage strategies, no matter how outstanding the historical data, will experience periods of underperformance compared to the market.

Ultimately, this is because the market is constantly changing, and stocks can change due to unpredictable specific situations.

A trading model needs to adapt to market changes while maintaining its uniqueness to avoid becoming a mishmash.

This is a process based on a framework that is continuously improved and upgraded, and it is a long journey.First, let's talk about the framework issue, which is the essence of the trading model.

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The key to the trading model lies in the framework not having major errors.

There are several common errors as follows.

1. Only applicable to the stage of the market.

There are too many trading models that thrive in a bull market and fall to pieces in a bear market.

The change and switch of market style are actually very fast.

For example, in 2023, it was still mainly about speculating on garbage stocks without performance, and various speculators could use the "dragon generation" flag to speculate.

But by 2024, this trading model was completely unworkable.

Although there are still some demon stocks, the proportion has been greatly reduced, and the difficulty of hitting the board has suddenly increased.The strategy that was still making a fortune in 2023 has become a losing strategy by 2024.

This kind of strategy, which is suitable for a bull market but not for a bear market, cannot become a fixed trading pattern. Many people are deeply involved in it, and the money they have made with difficulty is eventually lost.

This also confirms a saying, profit and loss come from the same source.

2. It is only suitable for small capital volume.

Different capital volumes must face different trading patterns.

The trading patterns of those who hold tens of thousands, hundreds of thousands, and those who hold tens of millions, or even hundreds of millions, are definitely very different.

For small capital volume, risk control is placed at the back, mainly focusing on short-term rapid profit methods.

Due to the small capital volume, there are more choices of stocks, and the quick entry and exit trading pattern is the most suitable.

But when the capital volume reaches more than one million, the issues to consider are different.

For some stocks with a daily transaction volume of only 30-50 million, one million can affect the price of the stock.Moreover, it is time to consider moderate position trading, and risk resistance has started to become a factor to consider.

Although quick entry and exit is good, the number of available stocks is gradually decreasing.

Therefore, for small capital, what needs to be considered is completely different from large capital, and there is no need to consider the trading model of large capital at the moment, just make money first.

3. Do not set a stop loss.

Any trading model should set a stop loss, remember, any trading model requires a stop loss.

Some people say, I buy blue-chip stocks, do long-term value investment, no need for a stop loss.

Not setting a stop loss is based on the premise that this listed company does indeed have long-term value investment.

What if the company's operations deteriorate? What if the company is going bankrupt? What if the company's performance is a bombshell?

State-owned enterprises are also very common in bombshells, so when it is time to stop loss, it must be stopped.

Not setting a stop loss is not a qualified trading model.However, the stop-loss conditions can be stringent and strict, and stop-loss measures should not be taken unless in extreme situations.

But for some short-term trading, stop-loss is a common practice, as it is necessary to ensure the utilization rate of funds, and mistakes must be acknowledged.

Making the worst-case scenario is a compulsory course in investment and also a part of it.

There are many ways to set up the framework, depending on the individual's belief in trading methods, whether it is technical, information-based, research-based, or value-based.

There is no absolute right or wrong, and the results of the transaction are all aimed at making money, which leads to the same end.

A trading model that can make money is a good model.

Next, let's talk about how to improve the trading model.

After all, most trading models may only score 50-60 points in the early stage, and it's not bad if they don't lose money.

But with the verification of the market, the passage of time, and the alternation of bull and bear markets, if they can be gradually improved, they can reach 70-80 points.There is a trading system that scores between 70 to 80 points, which essentially allows you to treat the stock market as an ATM, with the only difference being the speed of withdrawal.

So, how should one refine their trading model?

This is indeed a bit complex because different trading models will definitely have different optimization methods, but the general principles are the same.

There are three key points.

First, market validation.

If you can use formulas and your trading model has a solid standard, then you can use data backtesting to verify it.

The market is the best teacher; do not make subjective assumptions.

Of course, market validation requires a certain frequency and volume. It's not enough to verify it just once; it must be repeatedly verified multiple times.

The reason is also simple: there must be a margin of error. Only with a sufficient number of trading samples can the model's correctness or incorrectness be verified.

Second, summarize significant losses.Seize the big and let go of the small, especially the big pitfalls.

When your trading pattern experiences a significant loss, it is essential to reflect and summarize.

Completely eliminate such situations, whether by changing the stop-loss strategy or by completely overturning the trading pattern.

Stepping into a big pit and suffering a particularly large loss can make it difficult for you to recover for a long time.

Protecting the principal is always the first task of trading, and an excellent trading pattern does not allow for major mistakes.

Thirdly, learn to let profits run.

Losing small amounts and making big profits is one of the key points in the profit model.

Those who think about making 1% every day and accumulating over time are not many that can be effective in the end.

If you can only make small profits each time, then you should look at how you miss the opportunity to make big profits.

Profits sometimes need a certain amount of time to run out, rather than accumulating day by day through high-frequency trading.Seize the opportunity to make a lot of money, such as how to ensure that the trading model can make a lot of money in a bull market, which is the core to think about.

The improvement of the trading model definitely has a process, at least it needs to go through a complete cycle of bull and bear market.

A lot of theoretical things also need to be verified by time and practice to determine their correctness or not.

Investment is not the more anxious, the more results will be achieved.

Trading is not the more hardworking, the more money can be made.

Good trading models all require investors to explore slowly and verify step by step.