Why a Good Trading System is only 20% of the Game?

only 20

Since my move back to Asia, I have met many new traders – including professionals, beginners as well as some who are just completely clueless about trading.

It’s quite an interesting experience for me as I could tell very quickly the ones who will be a successful and who won’t. I don’t think I have a crystal ball but I am only making the assumption based on one simple fact – the questions they ask. The common theme among the beginners and the clueless is this:

How do I find the Ultimate Trading System”?

I made the assumption not because of the above question, but because that was the only question they asked. It was clear that they are putting too much weight in finding the Holy Grail – which, in my view, does not exist. Worst of all, some of them have not (and are not planning to) enrol in any form of Trading Education or Mentorship.

Note: Just to be clear, a Trading System is defined as a systematic and process orientated method of entering and exiting the Financial Market.

Trading System is only 20% of the Game

Today, I’m going to share something pretty crucial for your trading career, and that is – having a good trading system is very important, but the system is only a small part of the game. In my view, a good Trading System only contributes to 20% of Trading Success.

Just as an illustration, many amateur traders get frustrated when trading results are not favourable, they often give up on the system and/or start to jump from one trading system to another – see related article (Don’t let the Frustration Bug Bite). Some even go to the extent of blaming the Market or their Brokers – but never themselves.

On that basis, I’m pretty confident to say that many amateurs spend about 90-95% of their time working on trading systems. Many amateur traders do not realise the only thing that stands between the market and the system (assuming that it is a proven profitable system) is YOU. If you, the market and the system are not in sync, you are pretty much assured long term trading failure.

The Remaining 80%

In my view, I strongly believe that the remaining reasons required for trading success is Trading Psychology. However, as mentioned in my Free Guide, Trading Psychology is a very broad area which covers multiple subjects or can be multi disciplinary. Hence, please do not jump into the conclusion that I’m only referring to Emotions or Personality of traders. Instead, it should be a combination of the following:

  • Money Relationship
  • Belief
  • Positive Mentality & Attitude
  • Emotional Awareness
  • Routine 

Mind Map

(Click on image for larger view)

The mind map shows the topics covered in the Free Guide. Please feel free to get a copy here as I will not be covering it in this article.


Like Psychology, this is a fairly big topic as well. In my view, I would break Management down into the following sub-categories:

  • Trade Management
  • Money Management
  • Risk Management
  • Self Management

There are a few schools of thought on this subject, some would argue that Trade, Money and Risk Management are part of a Trading System and they should not be view separately. Some would also argue that Self Management is part of Trading Psychology.

To be honest, I’m not here to debate with you to see who is right and who is wrong. My point here is to highlight the fact many amateur traders spend too much time on the system and they are not aware of the importance of Management.

Similar to Trading Psychology, Trading Management can be multi dimensional and I have highlighted some of them in my previous article (see related article – How Great Traders Manage Their Multi-Dimensional Roles Effectively). Again, I believe this will further highlight areas that one might overlook.


successYour Trading System is really only a small part of your Trading Career. However, just to be clear, please do not ignore the importance of having a good profitable trading system. In fact, I highly encourage you to continuously develop your trading knowledge and to make your Existing system perfect.

Of course, if your trading system does not show favourable statistical results (including Expectancy, Reward:Risk ratio and etc) based a large enough sample size, then do go ahead to change it or dump it. Nevertheless, only change it after having a systematic review.

There’s nothing wrong if you have been all over the place in search of the “Holy Grail” trading systems. As the saying goes, “you don’t know what you don’t’ know”. However, ignorant is not valid reason any more. On top of that, if you’re reading this right now, I strongly encourage you to re-evaluate your trading plan.

Thank you.

Anyway, hope you’ve learnt something from this article. If you like my work, please “like” this on Facebook or Follow me Twitter.


Leave A Response