Trading Truth 110

"The system that's best for you
may not be best for another trader."

Like a suit of clothes, your trading systems need to be tailored so that you
are comfortable with them.

In considering a system, the main area of concern is whether it is capable of operating within the limit of risk you are prepared to run in order to get the return you require.

You have your own attitude to risk and this must be reflected in your trading system.

A good way to consider your attitude to risk is to imagine a continuous scale, commencing with cautious at one end and finishing with bold at the other, and having all stages in between.

You would like to place yourself on that scale and then have a way to tailor your system to fit - taking into account your other needs, particularly the return on capital you require.

That's exactly what the professional traders do and you may be interested to know that most of them tend to have a cautious attitude.

Professional traders use a special method called evaluation to test and assess the capabilities of any system against their own standards. Their final results reveal whether the system being evaluated satisfies all their trading goals including those for risk and return.

Of course, it doesn't follow that any system you choose to investigate will be capable of meeting your requirements, in which case you will reject it and look for one that can.

Systems you reject may suit other traders with different goals and a system that is fine for you may not appeal to others.

The reason this is so important is because unless you are comfortable with your system you will never be able to obey the 'first commandment of trading' - follow your system.

 

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Copyright David Bromley 2006
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