When a trader is designing and back testing a trading system, s/he is basically making numerous decisions during the design phase about which criteria must be met. The trader then backtests the system to see if that gives positive expectancy. If the trader is satisfied with the backtest's performance, and the system is based on how the market works, then the trading system basically becomes a shortcut to decision making during live trading. Another way to look at trading system is through Ed Seykota's quote: "A trading system is an agreement you make between yourself and the markets." Unfortunately,for some traders their emotions become their "trading system". . . a recipe for disaster. Bit like driving a car based on one's emotions, ignoring red lights (eg. not honoring stop losses, position sizing, etc) . . traders like that won't last too long.
Good Morning PPC, Thanks for the response. That sounds like alot of work and thinking. I think building systems is too much work because have to think of trading idea, back test trading idea, then start over again again again again again again hoping to find a good trading systems. Then you have to hope the system works for the next 10 years to make you a millionaire. You do allll that work to bet on one system for the next 10 years. What if the system fails? That is tooooo much work for one person to do. Been there and done that. It is FAR more easier to just trade the charts manual and HOPE it all works out. I find it easier to just try my best and make the best guess. NOONE has the answer. Best to stop looking. Ed Seykota's opinion does not matter because he is not showing me how to make money in the markets. He is just talking theory. I agree, using too much size and adding to losers cause me to lose alot of money. I agree with you on that part. All that other stuff I kindly disagree.
%% Good points + yours usually are. BUT that PTJ quote=trade was an obvious[by his own admission,waaaaaaaaaaaaaaaaaaaaay to big an overtrade on leveraged cotton.[Never play macho man with market LOL] A regular business would require profits , +plan prefered; no extreme risk moniter needed like leveraged markets-like cotton context. Great reads here.
Once your good at all the technical aspects of the job, you will know how important it is to control your stress and thoughts.
Good points + good %. Some are pros, but not in the SEC sense or data payments. But many SEC rules are helpful; they reduced exchange fees not to long ago+ would to God all govs would do that. More , that way or MCD or whole grains , or whatever LOL. I usually did not ask the RE agent for a discount\ usually\ the seller got to help with that LOL.
Simple answer: YES. I am well aware of the approach that "if you had a clear system you trusted, you wouldn't need to deal with psychology. Psychology is just an excuse for traders who don't know what they're doing". And it's true to some extent. But ask yourself this: WHY are you trading without a system you trust? WHY don't you set clearer rules? WHY are you risking money without knowing what you're doing? And bingo - you're back to psychology. Trading psychology - from repeated emotional-mistakes, to self-sabotage, and even fear-based rules (that are rationalized to make sense but are actually set to avoid pain and discomfort) - ARE THE SINGLE BIGGEST CAUSE OF TRADER FAILURE. PERIOD.
1. WHY are you trading without a system you trust? Because it is the only system that works. 2. WHY don't you set clearer rules? Because there are no rules I could set. 3. WHY are you risking money without knowing what you're doing? Because it is instinctive, subconscious driven and I can't quantify it. I ask myself these questions everyday since I started experimenting with day trading last year. It seems the only system that works for me is no system. I simply trade with my subconscious instinct. I can't quantify it. I tried to capture the essence with data driven rules, none worked.
%% LOT like driving an auto; certain rules of road are important, like stops And in USa, favor the right side