Money is neither my god nor my devil. It is a form of energy that tends to make us more of who we already are, whether it's greedy or loving. ~Dan Millman
Developing a good trading system is not easy. If you are looking for an ultimate trading system that can trade all markets like stocks, forex, futures, options, bonds, commodities ETF you are not far from that. Professional traders take many years to develop a winning system. Experienced traders know this fact that money keeps on flowing from one market to another. So in order to make a fortune, you need to follow the trail of hot money. For this you need a universal system that can trade different markets. A system needs to be tested a lot under different market conditions and its statistics compared with other trading systems before a trader can feel satisfied with the results.
One can develop a stock trading system that can swing trade or day trade stocks overtime. One can also develop a forex trading system that can swing trade or day trade the currency markets. But can you develop a system that can trade all types of markets like stocks, forex, futures, options, commodities, bonds, ETFs? It will take a lot of experience trading different markets over the years to develop such a universal system. Technical analysis and fundamentals are the same for almost all the markets. It is in the use of technical indicators that difference comes.
For example, in forex trading, the group of technical indicators that give you the best system might be totally different from those that are best for trading crude oil futures or gold futures. Similarly, something that works in the forex market may not work in the stock market.
There are a wide variety of systems online that are free and can be purchased. But what and how can you make sure you have the best forex or any market trading system for you? Each trader has their own style of trading, be it short term day trading to the longer term swing trading. Regardless of how you trade there are two factors that every system should address.
The first point the best forex trading system for you should address is that of clear entry and exit signals. No trading system should leave any entry and exit of trades open to guess work. There should be no chance that emotion can come into play. There must be clear, 100% mechanical rules that show when to enter a trade and when to exit it. Without a solid set of rules for entry and exit you may find that your emotions cloud your trading decisions.
The second point is that a good trading system should have a defined set of rules regarding stop loss size and placement. There are many trading systems which promise high returns, and they in fact are able to deliver on this promise. The problem is, however, that they have no or extremely poor money management rules. Without a set of rules regarding stop loss placement, you will find your trading capital quickly erased due to a few bad trades. No matter what market or timeframe you trade, the best trading system for you is one that has a clearly defined set of rules regarding entry, exit and stop loss placement and size
By developing your own trading systems and strategies you can become a very successful trader. If you know how to respond to matter what the situation then you will be the best prepared to deal with any issue particularly if it is a bad situation. As any boy scout will be able to tell you it is always best to be prepared.
There are many maneuvers and strategies that can be used to develop your own markets trading system. You should have a plan for any occurrence. By having these maneuvers at your finger tips you will be able to make the most from any situation and making a profit from a market fall even if it is small is important. There are lot resources available to help you develop your plan.
Experienced traders will have built their own systems based on their experiences as well as historical information about currency pairs. The Internet is a great tool for finding information on trading. You can also find a lot of reviews and ratings for different sectors of the market. Information can be found at trading specific blogs and forums and you want to pay attention to unbiased information. There are many free resources that provide good information.
When reading up on trading advice or talking to other traders you need to only take unbiased advice as many people's experiences will color their advice. You want to try and minimize any of the bad advice that is circulating. The way to determine if someone is unbiased is to see who is providing the information and their background.
Reviewing a trading system is go as you should give it a test run before using it on the market. The use of real time trading experiments can show how effective your system is.
There are also micro accounts or demo accounts in which you can make trades on the market, but they aren't actual trades it is like using a dummy account and you won't lose any money if your system needs some tweaking.
Developing a complete trading system does not always guarantee success in trading but lack of one will lead to giving money back into the market. Having developed a trading system that works for all markets will give you a better edge and increase your odds of winning. Money management, psychological balances and emotional indifference play vital roles in trading. A system developed will have drawdown on certain day, week or year, your ability to master those days will position you as a professional trader.
I will fully discuss ways of developing trading strategies that work for all markets but you must understand that trading strategies alone cannot guarantee you great success in the market because of the dynamism of the market. Traders can only develop an entry and exit strategies, no one, I mean no trader, in any part of the world will in advance know the extent of a particular trend. We can all use Fibonacci retracement and projection of price and time, pivot point for resistance and support, moving averages and many more. All these are just ways of defining our edge. All in all just keep it simple.
When you are developing a strategy, always include:
Resistance and Support Level
Your resistance and support level can be as simple as horizontal line of the previous trading period or you can calculate the support and resistance level using tools like pivot point or Fibonacci ratio. This gives areas or zone where price has previously find resistance. If the resistance still holds you will be looking to sell around those zone and support zone where price find support and you will be looking to buy in those zones.
Multiple Time Frames.
There are different types of traders: day, swing, position traders. All have their time frame to watch. You will need to drilldown to lower time frame to see what the price is doing in relation to higher time frame before a trading decision is made. Multiple time frame concepts will help you in good trading decision.
Indicators
Only few traders I have heard of who don’t use indicator, other millions of traders use indicators. No indicator will be 100% accurate but when combine with other tools; it will rake money like never before. Whether lagging or leading indicator the combination with other tools will serve good purpose of placement good trades.
My trading system is actually based on these premise which I will discussing in details as your enjoy the journey of trading
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