Based upon my own experiences, I wrote up an article summarizing the methodology I’ve developed and adopted for trading systems development. In particular, I strive to balance out technical aspects of systems development with human factors such as psychology: Find Your Niche by Developing Balanced and Individualized Trading Systems While more technical aspects of system and strategy development are important, my experience has been the trader can be the “weakest link” if the right interest level or psychology isn’t in place. Even if a system is technically profitable, it will fail if a single human factor is out of balance or missing. In other words, a system requires an overlap of interest, skill and psychology to succeed. Even something as technical as algorithm development and backtesting requires creative input from someone with an interest to study and understand the markets. Similarly, if the performance characteristics of a backtested strategy cause a trader to capitulate or system hop to another system, this is likely not a good strategy. The following diagram summarizes this relationship between human factors and trading systems: I should note that Matt Zimberg of Optimus Futures read the article above and reached out to me for an interview. We discussed the concepts describe, finding an edge and how to design systems which balance out the human factors. Matt rounded out the discussion with his own unique insights and extensive knowledge: With respect to the overlap of human factors, trading methodology and systems development, I hope this information provides some food for thought to other traders. I'm also interested if anyone has any unique insights or knowledge they can share.
The traits that you listed which are outlying the center circle are all bad/negative. Yet you presume here in the illustration that when they overlap in the center, they are then creating good trading traits? I don't get it. IMO, you need to consider how to present this information in a different format. Possibly you want to think about how good trading traits can be infected/damaged by bad practices from one of your three categories. The center traits are what we all aspire to. But any one of the outlying can send us off the path.
Thanks for the constructive feedback. I think the wording in your last paragraph describes the information in the Venn diagram really well. For example, we aspire to have conviction with our trading. However, lacking underlying knowledge of the markets or sufficient skill can shake/damage/infect our confidence.
that chart is junk cause there is only one thing important > develop a plan and stick to the plan do not deviate in the middle of the plan. if the plan does not work fix it after trading but during trading do not deviate from the plan. screen shots and notes are your best friend.
I do appreciate your perspective. One thing I've learned is different traders have a different viewpoint and thought process for approaching the markets. What works for one trader doesn't work for another. This chart is just one way to look at it, and is not meant to be all-encompassing or set in stone. Just one way to think about it. I agree with you about sticking to the plan. In my experience, it's good to root cause the failures for deviating from a plan, and work on those issues. Among other things, patience is something I've had to work on.
I agree with the OP that every trader aspires to have a successful trade by possessing the positive traits depicted in the Venn diagram. However, the layout is kind of confusing because only positive traits can make one succeed in become a good trader. The mathematics of negatives making positives does not apply in the forex market