Thursday, 28 January 2010

Systems Trading Ideas

Systems Trading Ideas: When it comes to designing a trading system, it is very important to think about entries and figuring out the best time to pounce on an opportunity. BUT… most of your attention should be focused on EXITS. Why? Because that’s what makes you the money. There are many systems out there that focus on getting in, but leave little to be desired when focusing on getting out. They do this because most people think entry (i.e. buying at the right time) is the key to a system being successful and making money. You buy a stock at the right time and then you hold it and watch the stock appreciate. In other words, the buy-and-hold strategy that wall street teaches us. A look at the last decade should be enough to convince anyone that buy and hold does not work. Unless you were born in 1932, 1949, 1974, 1982, or 2003 and were of sound mind and body to even actually buy stocks, then you’re chances of being able to make money from buy-and-hold were slim. 5 times in the last 80 years buy-and-hold would have actually worked very well. Those are miniscule odds. You are better off develop a system that is about making desired profit targets in a 6-24 month time frame, and cut your losses quickly if it doesn’t work out. My advice on developing a system would be to spend as much time on your exits as your entries and you will probably end up being profitable in the long run, and that’s really the name of the game. Making money over time.

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