Friday, 12 February 2010

Systems Trading Ideas: Your source for system trading, trading system, systems trading, or stock trading system ideas

Trade Your Beliefs

There is a myriad of ways to invest and trade in the stock market. Principally, there are two schools of thought when it comes to investing and trading. The two schools are Fundamental Analysis and Technical Analysis. No matter which school you subscribe to, it is important that you develop a perceptual filter (i.e. a fundamental approach or technical approach) that matches your personality and your beliefs. You must invest using a methodology or a system that you believe in first and foremost. If you don’t, you will not be successful. You will be jumping from system to system in an attempt to find a holy grail that will make you money. The fact is there is no holy grail for making money. There is no magic system that will work all the time. It takes some time to develop your beliefs about the market and then to try to figure a way to trade or invest in the market using your beliefs. The practice that comes from trading or investing in what your beliefs are will start to build an intuitive feel inside you for market activity. That experience will give you the edge you need to be successful. One of the first things you must do before you trade or invest is examine your own beliefs about the market. If you don’t believe that anyone can make money in the markets, then you should give up trading altogether. If you believe that only the big hedge funds and banks control the market and have the inside information, then the system or methodology you develop should be based on trying to figure out what the hedge funds or banks are doing. If you think following the crowd is a bad way to find good investments or trades (i.e. herding or group think), then you must develop a system based on finding opportunities away from what everyone else is thinking about. So you can see by examining what you believe about the markets, it is possible to come up with a system that has the potential to be successful. The reason for its potential success stems from the fact it’s coming from your own mind. You could be the only person in the world with that system and that may be the reason it works.


Thomas Adair said...

You say there is no holy grail to trading. You say no, because you don't know.

Study history, and you'll see how many things were impossible. Actually, what wasn't impossibe once.

I developed the impossible.

Thomas Adair

Niki Arinze said...

@Thomas: I trade my own beliefs. My own beliefs are such that I do not believe a holy trading grail exists. People make money so many different ways in the market. If you asked successful traders and investors, “I have the holy grail to trading. Do you want it?”. I don’t believe that they would because they have already developed something that already works for them. My belief is that financial markets are nothing more than the collective psychology of human beings. The decisions and transactions that people make are largely emotional in nature. I believe is that this nature in humans is unquantifiable in the mathematic sense. Since we don’t create ourselves, we don’t have the ability to construct a mathematical model that will predict everything we are going to do. So, assuming there is only one system or methodology to beat the market is imperfect, at best.