Today, we explore how a modern trader named Huang Xiaodong built a complete trading system from scratch. His path from stock investing to becoming a professional forex trader illustrates key principles that anyone can apply.
The "90% Technical" Decision Framework
Huang believes technical analysis should account for about 90% of trading decisions. He explains: "In my decision-making, technical analysis is the foundation, the key factor for buy and sell decisions. Fundamentals are mostly interference. Most of the time, the market has already reflected important information in the trend. Important releases rarely reverse the trend. If the trend is unclear during major news, I avoid that period and wait for clarity".
He allocates only 5% to fundamentals and another 5% to intuition and experience. Intuition is used for verification after entry. If the trade does not match the expectation, he exits immediately.
Position Sizing and Stop-Loss Rules
His approach to position sizing follows one principle: always trade light. He focuses on hourly chart swing trades. Light positions allow him to tolerate short-term volatility without emotional reactions.
For stops, he insists on full liquidation rather than partial exits. He avoids adding to losing positions entirely because it risks compounding errors. His risk-per-trade is kept around 30% of his "comfortable risk capacity." He targets drawdowns within 2% per trade and aims for 2% profit per trade so that one or two trades can recover from any loss.
The Journal and Review Process
One critical part of his system is the daily trade journal. After every trade, he reviews the outcome to separate strategy-driven profits from luck. "If a profit comes from luck, even if profitable, I treat it as a mistake and review it".
The journal includes entry/exit prices, trade reason, emotional state, and lessons learned. This practice helps avoid repeating the same errors and gradually improves strategy over time.
Key Takeaways
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