A general principle in trading for me is that without thorough investigation, comprehension, and experimentation leading to full acceptance, no trading rule or system can be properly executed. If one cannot completely understand and embrace the reasoning behind some method or axiom, whether internally discovered or externally given, the reflex necessary to act without further thinking or doubt is fatally compromised — the circuit between the eyes watching the screen and the finger on the trigger cannot afford even the slightest impedence. One area in my trading which I’ve been struggling over has been the disparity between the success of my entries versus the failure of my exits on profitable trades. If I had the ability to accurately anticipate and identify the origins of a move, why were my attempts in capturing and keeping the bulk of the profits so horribly inept? Why was my timing in closing trades so blatantly pathetic in comparison with their openings, to the point where I would either consistently stop-out on the lows of retracements, or conversely wind up giving back the entire move if I tried to avoid getting shaken out. (more…)
Archives of “systematic approaches” tag
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1) The psychological model – What makes great traders, this model asserts, is self-mastery. Great traders don’t necessarily possess better trading methods or secrets, but apply common wisdom more consistently, with less emotional interference, and therefore with better risk management. Developing trading expertise is a function of developing oneself in this model.
2) The scientific model – What makes great traders according to this model is superior research. Markets exhibit cause-effect relationships, and these relationships shift over time. The role of research is to uncover these patterns and capitalize upon them. Such a model is, in a sense, the opposite of the psychological model. It hypothesizes that, once you discover inefficiencies in the marketplace, these can be incorporated into mechanical systems that eliminate any troublesome human elements from trading. (more…)