Professional Trading Methods

"Professional traders direct their systems
towards their goals."

Professional commodity traders want to know that the systems they are using are 'pulling in the right direction' towards achieving their goals for % return and risk limit.

What are these goals?

There are two primary goals - one for the required % annual return and another which is the maximum risk the trader is prepared to tolerate on his account.

Unless he has only just begun to trade, he will already know the number values of these goals. They depend largely on his attitude to risk and are personal to him. They don't vary with any system he is considering.

How is the system harmonized with the trader's goals?

Just as all traders are different, every system has its own personality too, in the way it 'rides the markets' and this is reflected in the movements of the trader's account balance over time.

Professional traders use a method of evaluating systems with historical price information to test how a system performs in simulated live trading conditions.

By introducing the trader's goals into the process and relating them to the account movement, it is possible to find what is known as the risk resonance of the system.

When all the stages of the evaluation are completed, the final results will indicate if the system is capable of being 'trained' to follow the trader's goals. If the results are satisfactory, the trader can choose to trade it of course.

In this way, professional traders direct their systems to perform in line with their goals.

There is no guarantee of course, that the goals will be achieved because markets are unpredictable, but by thorough evaluation and assessment the trader has given himself the best chances of success.

 

Modus Trading
Contact David

Copyright David Bromley 2006
All Rights Reserved.