Monday, August 21, 2006

Choosing a trading system

I am currently considering what to use as the basis for an initial trading system. Until now, I have made decisions based on pieces of information and opinion without considering the wider context.

A trading system seems to involve a number of aspects
* Money management -- decisions that are semi-independent from the trade itself, relating to ideas about conserving capital, how much to invest, why to protect profits and when to stop losses
* Regular review points -- consistent and regular examination of holdings and performance
* Share selection -- choosing candidates for purchase
* Triggers -- conditions for buying and selling shares (other than stop loss)
* Goals -- explicit goals so that one has a reference point to judge against
* That Personal Touch -- recognition that you must make all these decisions your own
* An understanding of fundamentals and psychology

I will make further posts about each area as I consider them further, and will also post on the construction of a simple system, but one which is based on real numbers and whose components will be backed up by reasoning, statistics and argument.

Cheers,
-MP

1 Comments:

Anonymous Crazy Jim Smith said...

Hello,

Money management and psychology are probably the two main things that a trader needs to be most aware of.

Then there is developing and knowing your personal style.

The charts and trading systems I feel aren't so important.

I know that personally I don't rely on technical indicators too much except the more basic one from time to time.

That's my two bobs worth anyway.

Nice to see and Aussie blog on trading.

There aren't many around so keep posting.

Kind Regards

8/27/2006 07:47:00 PM  

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