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by Norman Hallett, former CTA/Trader Most traders move from trading system to trading system, over time, until they find one that suits them& one that is comfortable to run, and tests well over (back-tested, then real) time. Some traders never stop looking for the right system. THAT is a problem. There are many systems that can generate nice profits over time. To settle on a trading system thats right for you: First, you have to believe in the process by which the system generates trades. Who was Fibonnaci, how did he arrive at his methodology? Does it make SENSE to you? Maybe youre a visual sort of person and you are drawn to Candlestick charting. Take the time to understand why the patters mean reversaland not just accept the picture. Go deep. Choose a guru that you will need to trust 100%. If you choose to take your trades from a guru, understand where his or her godliness is coming from. This can be a dangerous choice in that you are giving up control to another. Choose wisely! Second, whatever system you decide to go with, Back-test it. In todays modern world of software, theres no excuse not to run all the back data you can through your system and see what the results would have been. Although back-testing is no proof of future performance, at least you can see the logic of your system at work. Third, test your system in the real time. Take a VERY small amount of risk capital and trade live. This could be the most valuable phase. Although you wont have fully-investedemotions tugging at you, you will feel something, and you can learn to control your emotions as you allow your system to do its work. The bottom line to all of this is that if you don't have TOTAL CONFIDENCE in your system before you start trading it, you will doubt your systems ability to perform with every losing streak. Thinking about your system and its validity while you are trading it will spell doom. Do all your thinking in the pick a system stage. Now, when the trading day is over, you should be reviewing your trades, but not your system. Did I follow my system correctly? Did I weaken in my resolve to follow my system? How can I (not my system) improve? Nobody is saying that you should be sticking to a system that is losing in real time. What I'm saying is you should only judge your system over the long term & not on a daily or even a weekly basis. THINK long and hard about what speculation is and whether it fits your investment objectives. THINK about the system you are choosing and why its right for you. THINK about the results you get from your back-testing and your real-time testing of your system. BE A MACHINE (DONT THINK) when you are trading your system. This is why I am a huge proponent of mental training for traders. Unless you can control yourself, you can never control your system. In order to control yourself and your emotions, you have to believe totally in your trading system. Do the work! Think! Then dont think! RECOMMENDED: TradingMind Software Click Here |