When you decide to build your own trading system, you need to understand that a trading system must stand on the Four Pillars, and none of them can be missing. A car cannot run with only an engine but also needs wheels, accelerators, and brakes.
The Four Pillars are entry rules, exit rules, risk control, and money management. Many traders focus only on entries while having little idea of how to exit or manage risk. Entry seems like the most direct and exciting way to make money, and it often gives you a rush of dopamine. However, the other pillars are usually what really determine whether you can make money in the long run.
This book will give you a complete prompt template that covers all parts of a trading system. You only need to feed it to AI, and it will generate a full set of source code for you. But you can’t ignore these ideas, because how well AI works depends on the user.
The question most traders care about is, “When should I buy?” When you’re staring at a chart and watching prices go up and down, your first instinct is always, “Should I enter now?”
That is why the market is always talking about entry signals. Some say a moving average crossover is a buy signal, while others say an MACD histogram turning green is. Some say a Bollinger Band breakout is a buy signal, while others claim that another mysterious indicator turning upward is. They sound different, but in essence they all do the same thing—a trigger for action. Your system should give you a clear signal to enter when a certain condition appears.
The problem is that many people ignore the fact that entry rules are never meant to predict the future but only confirm the current market state. For example, buying when the MA20 crosses above the MA50 does not mean the crossover can foresee the future but simply means the short-term trend is stronger than the long-term trend. Similarly, going long when the price breaks the upper Bollinger Band is not magic. It only shows that volatility has expanded beyond two standard deviations of the past twenty days, which might indicate a new trend.
Entry rules are not a crystal ball. They cannot tell you the future but can unify your actions and prevent emotional trading. Experienced traders know that what matters is consistency rather than the indicators you use. You have to follow a rule once you make it. If you use a dual moving average crossover to get in, stay with it. Do not switch to MACD just because it looks better.
Beginners, however, love to obsess over trivial details, as if some ultimate secret is hidden there. They treat indicators like sacred knowledge, even turning them into pseudo-mysticism. For instance, someone may insist that the period of moving average must be set to 21 instead of 20 because 21 is a Fibonacci number and carries mystical power. This sounds mysterious but has no scientific basis. If changing a parameter from 21 to 22 makes the whole system collapse, the system is nothing but overfitting, which means tailoring a strategy perfectly to past data to look beautiful in the backtest, but in real trading it falls apart. It is not a system at all. It is just a script written for history. It can trick a backtest but never the future.
Even worse, most traders do not use entry rules at all. They trade mainly on impulse. They read the news today that the Fed lowered interest rates, and they hurry to buy with full leverage. An influencer on Twitter warns of danger tomorrow, and they panic and sell everything. The outcome is predictable. No matter what happens to the market, they always have a reason for losing money.
A proper entry rule must have four characteristics:
- Clarity: The rule must not be vague. Feelings and intuitions are useless because they give no actionable standard. On the other hand, “Buy when the MA10 crosses above the MA30” is clear.
- Repeatability: When the same condition appears, you must act the same way every time.
- Simplicity: Don’t use three conditions if two are enough, let alone a dozen indicators. It is always overfitting when you have more than two conditions.
- Objectivity: It must be based on objective market signals such as indicators, volume, and candlesticks instead of your guesses.
The theories of price action and the Wyckoff method, claiming they can deduce the moves of smart money and are superior to indicators, are becoming popular these years. They sound impressive but are still subjective. I once became obsessed with them and spent sleepless nights studying, only to find that their rules were unclear and could be interpreted in different ways. In price action, the same pin bar can be called a reversal by one person and a continuation by another. In the Wyckoff method, no one can agree on which candlestick counts as “spring” or “shakeout.” In fact, they are nothing more than guesses.
Only when you establish entry rules that are clear, repeatable, simple, and objective can you truly take the first step toward building a system, but remember, this is just the first step. However, a lot of people stop here. Entry rules alone cannot guarantee profits. Even if you find an entry signal with a high win rate, you will still lose heavily without proper exits, strict risk control, and money management.
This book is not an encyclopedia of entry rules, and you also do not need to waste time on it. You can let AI help you choose suitable indicators and generate entry rules directly even if you do not know what MACD or moving averages mean. You do not need to waste time memorizing the details of dozens of indicators. Now throw away all the books about technical analysis on your shelf. What you really need to learn is how to design a complete system. The four principles of entry rules are what matter: clarity, repeatability, simplicity, and objectivity. You can ask AI to design entry conditions that do not break these rules.
Summaries:
- For most beginners, entry rules are the only thing they care about, but this is far from enough. Even worse, most traders have not even thought carefully about entry rules and trade entirely on impulse.
- Popular ideas in recent years, such as price action and the Wyckoff method, lack objectivity. You don’t need to waste time on them or on memorizing endless indicators.
- When you use AI to build a trading system, let it pick the right indicators for you. Your only job is to remember the four principles of entry rules and ensure AI does not break them when designing your system.
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