Talking about strategies Every trader has its own strategy and every strategy is never the same. There are many similarities, but if you take what looks the same strategy and give to the two different traders to use it, trading results will come up different. That is because every trader is different and some slight correction, during the process of making a decision, will take place. Many traders are concerning to create their own trading strategy without realising that there is plenty good strategies around. Even trader takes and uses somebody elseâ€™s trading strategy; trader will make it as own. Why? Reason is we are all different and as I have mentioned above - the same strategy, used by different traders, will have many small modifications and at the end trader will have its own strategy - unique and with Process, of creating the ability to reflect trader's personality. This completely unique article is not about good or bad points of one or trading systems, starts another strategy, but should help novice trader to from copying others. have a base to create its own trading strategy. One of the easiest ways and probably most suitable way to create a trading strategy is to take some well know trader's strategy and correct it to the trader's personal characteristics. Leave outside your pride, follow strategy of the better trader than yourself and from the start you at least will keep your account balance into some positive territory. That is very very good for the beginner trader. Process of creating completely unique trading systems starts from copying others. Trader, who thinks that he or she can create profitable new trading system in few month times, is very mistaken. For the new trader, copying others is just a best solution. Trader will have time to further educate itself and at the same time will have an experience of trading the market. From the top of my head, I would suggest to use Bollinger Bands indicator and its strategies. For those, who has enough experience in the market, and has a desire to create its own trading strategy, I would suggest one very important point - educate yourself about the market. Read theories and practices of other traders (traders, not writers), develop your own view to the market and choose one theory about the market. Just one, most suitable to your understanding about the market at the current time. You will not be successful jumping from Elliott wave theory to the Cycle theory or Classical technical analysis. It will confuse you. Choose just one. And if after some time you feel that particular theory does not provide you with the enough solutions to trade the market, do not be afraid to choose another. But do it one theory at the time. Do not confuse yourself. Knowledge is good, but to trade successfully is enough just one theory, one strategy. Remember, trading the market is not showing off how much you know, it is about how successfully you apply your knowledge. Trading strategy is nothing more than reflection of your understanding about that market mixed with the personal characteristics and desire to experience emotional state. Many traders do not
realize, but there are coming to trade market just for one reason – to get emotional discharge. Trading the markets and making money by trading the markets are two different things. This last sentence can easy be as a main idea for the whole book, but sadly a lot of traders do not realize the difference between trading the market and making money. Below are questions, which by my opinion, would help trader to realize – what exactly trading strategy he or she is looking for. 1. 2. 3. 4. 5.
On what theory basis you analyse the market? What time frame is suitable to you? Why are you interested to trade the markets? How do you find entry points? How do you find exit points?
Every trade, executed in the real market, is based on the market analysis or in other words –preparation. There cannot be trading strategy without market analysis. That is the key to success. It helps to define clear view on the market situation and wait for the right moment to get into the market. Time frame will clearly define amount of trades you will do per certain period of time. If you are using 5 min chart, during the day you most likely will get 1 to 5 trades (depends on the market), but if you are using daily chart it will 1 trade per month. So time frame will define how active you will be in the market. Ask yourself and be honest – why do you want to trade the markets? Heard that some guy made lots of money? Mother in law suggested? Looks cool? Be honest. Trading the markets is not easy and just small percentage of traders makes money for a living. Be responsible, before you will blow your life savings. Clearly define your entry and exit points. This will help you in two ways: you will not have a doubt to enter or exit the market; and if you enter the market not according to your definitions – you clearly have problem with your trading strategy. And one more thing about trading strategy – trading strategy must be written on the white paper. If you are not able to write it down, you do not have a trading strategy, it is just random get in and get out situations. Try it. Try to write down. You will be amazed how many “black holes” inside your current trading strategy. For now I wish everybody successful trading and happy daily moments.
Published on Nov 22, 2012