Six things I wish I knew when I started trading: Part Two – Trade a System
For me, and again, this is my perspective and opinion, it is essential to trade a system. While some traders count on just intuitively knowing when to buy and sell, I myself have found that the stress reduced nature of trading a mechanical trading strategy that just continually punches out profits over a series of trades is the way to go. (Notice that I said stress reduced, if you think trading is stress free you no longer have a pulse!)
Intuitive and discretionary traders do exist, I have heard it said that it takes many years to gain useful intuition that allows for consistent profits, and maybe it’s a more profitable way to trade, I honestly don’t know. I just never wanted to fail long enough to find my edge!
The stress of too many bad calls killed this route for me. I remember reading an article once that talked about Wall Street professionals. It was a compelling argument for discretionary trading, in it it said that the vast majority of professional traders do not use a mechanical trading strategy, they rely on their honed instincts and experience to trade profitably, so why would you not want to trade like the professionals? It’s a good question!
Fact is, as I have mentioned above, it takes too long. It reminds me of the phrase “Many are called, few are chosen”. Few of us have the time, training opportunities or emotional literacy to sustain a constant attack that would entail learning how to trade this way. Therefore in my humble opinion it is best to trade using a system that has proven to be profitable in the past.
In terms of developed systems, obviously we are not alone. There must be hundreds of services out there, some good, some bad and some great. If you’re reading this blog, you just found a great one. Is it the best? Probably not, but it is great.
Ultimately trading a system gives you freedom in your decision making as it makes it very black and white, which is the way I like to trade. That is not to say that I do not delve into the grey and make a discretionary call from time to time, but I do this very rarely and it has to be for very good reason.
The above picture is a sneaky peak at a screenshot of the trading system. It is my intention to make this system accessible via video/documentation download in early 2013. Here at HowDoITradeStocks, we have been working really hard in coding the system into Ninjatrader. It will visually right on the chart tell you when to get in, where to set your stop, and where to get out every day. It will also allow you to build your own portfolio and backtest any stock for as many years as you would like in the time it takes to click on the mouse. Proof is a powerful source for keeping us on track and helps us stick to the system going forward. I coded this system so that no-one need follow me blind, they will be able to do it for themselves. I would much rather teach how to fish than have anyone relying on me for years, as one day I may retire…