Online Trading (4)

This is how over 50% of traders start their position.

First, they guess which way the market is going to go. Now as surprising as it may seem there are many traders who do just that. They take a look at a chart or some news and then decide if they should buy or sell.
If they make money consistently then it is hard to argue that this is the wrong way to trade the market. The problem of this type of trading is that it is almost impossible to reproduce results consistently.
In other words, the trader that trades by instinct can never really pass on his knowledge, as there is no clear rule that he applies to the market on a regular basis. Not many of them have gone the distance and are there year after year.
Traders who apply a method to their trading inevitably have better results.
If you use the same criteria to each trade, then you at least have a reference point from which to work. If you are losing, you can then change specific things in your decision making process in order to find the right criteria.
By using a method in your trading, you are moving towards the scientific approach and just as a scientist will carefully research and record each experiment so should the trader trying to perfect the method he is using.
If you apply XYZ as your reason for entering a trade and you can see after a predetermined amount of trades that it is not working; then you can change X, Y or Z until you find something that does work?
Typically the method trader has researched a particular theory. You have to back test (applying the theory to historical charts) and come up with indicators, tools or some other method of determining the entry and exit criteria.
If at the end of his research you find that you can make money you will then apply that method to the market.
As you still have to make the decision to enter or exit a trade there is still the human element to consider.
Even though your method may tell you to enter a trade, for some psychological reason you have decided not to take the trade. There lies the weakness of the method trader. Even though you know you should enter or exit a trade you don't because at that particular moment in time some voice inside you tells you not to do it.
This is how you can improve your trade immediately....
The solution is to make it mechanical as much as possible.
There has probably been more written about mechanical trading systems than any other topic in trading. The premise of mechanical systems is that a particular theory he's been back tested over a long period of time and has consistently made money.
There is no emotion involved with the decision making process at all. If the system says buy the security then you buy or an order is automatically done for you.
This takes away all the emotional UPS and Downs and all you have to do is to buy the security and supply the money.
Trading is just like life. There is no correct way to trade only what suits you in your own tune and your own strategies.
As long as you include these elements in your trading system,
They are:
a) Your trading plan
b) Loss management strategies
c) Your execution strategies


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Trade the stock market with trend methodology.

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