Must Know Trading Systems That Achieve Long-Term Profits
The ability to confidently act and react to various market conditions, trading with a developed system that not only gets positive results but reaches your long term goals, is a giant first step in a trading career. Throughout my own trading career I have found a few vital techniques and principals that make me the successful trader I am today. My hope is that after understanding their purpose you too will find them valuable.
Do you believe that the more you trade the more money you will make? On the surface this rings true, however experienced traders will reveal that the best strategy when looking to make serious money is to understand one market inside and out.
When it comes down to it, the best trading system is simply that, simple. After all, how great can a trading system be if it paralyses your decision making and leaves you second guessing? Too many indicators and over optimization are the number one culprits of an over-complicated trading strategy. There are times when an over optimized plan will perform well; such as in historical data. However, it said system performs poorly in real time than it isnít much of a system, is it?
All successful traders do this one single thing. If you are not doing this one thing there is no way that you will last in trading. Every one of the most successful and long-lasting traders that I have met write down their stock trading system strategy. Before making their move, they surmise the market and pen their perception of the market. As they look over their plan they are able to question the attack angle and perhaps read it another way before trading. But writing your market perception and trading strategy really has nothing to do with making the best trade. It is all about claiming your perception and taking responsibility for how you read the market. Make the commitment and claim how you see the market before you trade by writing it down. If incorrect, you only strengthen your commitment to better your strategies in various market conditions.
One of the most helpful ways to add insight when perceiving a market is to back test. Back testing takes historical data and tests would be outcomes against the best strategies of today. Of course results are not 100% accurate since past conditions can never be exactly repeated. However, there are significant insights to gleam. Similar price movements and patterns occur over time. Why not test your trading systems against a historical period similar to todayís market? There is always time to allow for researching for invaluable market data.
Letís face it, trading confidence is invaluable. But how is one to gain this confidence when trading experience is slim? Back testing. Various trading systems help to read the market, but they only add confidence once acted upon. Whether you employ the candle sticks, moving averages, Fibonacci retracements, volatility breakouts or other trading systems is up to you. However, gaining trading confidence is also your job, and with back testing this confidence grows by leaps and bounds compared to those who choose to skip the method.
To quote one of the most world-renowned, professional trading consultants and coaches; Perhaps the greatest secret to top trading and investing success is appropriate trading money management, but sadly this describes very few traders or investors. It is a fact that proper money management is ragged among traders and investors. To achieve real success, superb money management must be enforced.
Can I tell you a secret? I call it a ìsecretî since there is so little correct information available about this subject. And this includes authorís who have written books about the matter! Some circles call it ìdiversification,î other ìrisk control.î It is commonly known as ìwisely investing your money.î Whatever you call trading money management,î know that its power is not in its name, but in its simple algorithm.
Bear with me as I paint a picture for you. Trading and conventional businesses have important similarities worth explaining. To have a successful business statistics must be kept on almost everything. This includes everything from potential customers, sales or conversions down to the average dollar per sale. Before any changes are made to the business they must first know the base line. This perfectly describes trading.
Before taking your trading to a serious level of any kind, and actually before you do any trading at all, implement statistic taking. Without statistics there is zero chance for improvement. Any change made is exactly the same as gambling in Vegas. Sure, people do it, but they also know the house always wins. Trading is a business and statistics such as R multiples, win loss rations, expectancy and a few other statistics must be tracked. If you need a starting point to learn more about trading statistics read Dr. Van Tharpís book Trade Your Way to Financial Freedom.
At last, you have a back tested, hearty and the best trading systems ready to go. Money management is no longer a worry, as you understand how to properly handle it. You understand the market and are confident in your techniques. You have successfully maximized your trading potential, congratulations! You are about to enjoy hard-earned success that will leave others wondering how you did it.
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