Archives of “market selection” tag

rss

Three Reasons Why Most Trading Strategies Fail

  
  Education
#  #  #  #  #  #  #  #  #  #  #

MAIL BOXI wonder how would you rank order market selection, setup/entry timing, protective stop, trailing stops/exit and position sizing in terms of overall importance to the success of a trading system?

A:  Each are important, but in analyzing numerous strategies I have not seen a tried-and-true ranking system that fits everything.

The reason I think (and my research proves out) that why strategies fail are directly related to three main things: 1) user error (i.e. failure to act on the signals provided by your system in a consistent manner without trying to outsmart the system, 2) over optimization and use of extensive leverage, and 3) the most important of all – little to no risk management through proper position sizing and stops. All in all, if you really are focused on improving yourself in 2010, the first place to look is risk management as it has more of an impact over your eventual success or failure than anything else.

10 More Trading Rules

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

1) Trading rules don’t normally fall out of the sky.Number-10

2) The emotional work is normally not undertaken by developing traders. After all this game should be easy.

3) Not enough time has been spent finding a system that is a fit to the personality of the trader.

4) You don’t really feel congruence with the approach.

5) As soon as you have a few losers you tinker with the approach or move to a new approach.

6) You are under-capitalized or for some other reason you mess with the approach then don’t hold yourself accountable for the fiddling and blame the approach.

7) You have unrealistic expectations as to the performance of the system in terms of win rate.

8) You are ‘bricking it’ about entering drawdown territory.  

9) Your system actually isn’t complete.  You haven’t got all of the following bases covered: market selection, position sizing, entries, stops, exits, tactics.

10) You learned a system or got a system from a marketeer or pseudo trader and it’s actually just crap.

Go to top