Do you really need a trading strategy?

I hope you caught my email on Tuesday about Wall St Time-Shift Trader. This system is now taking on new members, so if you’d like to find out what all the fuss is about – you can try it out for yourself HERE.

This is what independent review site Systems for Traders have to say about it: “Our return now, over a 9 month period is 50.90%, around +5.5% a month”.

Wall St Time-Shift Trader

Many people take their first tentative steps into the markets without any kind of plan, beyond the wish to make some money.

They might make their first trades based on news stories they’ve heard … on pundits’ tips … on fragments of technical analysis that they’ve picked up … or on gut feeling.

Sometimes these will work, and our new trader is left feeling that he or she has some kind of knack for this …

Sometimes it won’t work.

According to a Harvard paper, first-time entrepreneurs have an 18% chance of success. Surely in day trading, one of the hardest games there is, this is likely to be lower still.

So, what separates the winners from the losers?

Ask any successful trader and they will tell you that it isn’t anything to do with City connections, deep pockets or inside information. What they’ll tell you is that it’s down to three things:

• simple plans
• clear rules
• and ruthless consistency.

Trading is tricky because we pit our emotional brains against rapid price changes and immediate promise of financial gain – and threats of financial loss. These are not the conditions that human beings tend to do well in.

Which is why traders who fare the worst are those who are trying to “fly by the seat of their pants” – they make irrational decisions and they have no clear system for picking out what works from what doesn’t work.

I’ve written before about how dreadful humans are at evaluating risk. Our brains simply weren’t designed for trading – which is why they need all the help they can get!

So, if you’re trading without a plan, please don’t waste any more time setting one in place.

Trading strategies do not need to be complex, and shouldn’t be a daunting prospect.

Instead, they can be a few simple rules that enable you to monitor your trading … avoid emotional decision-making … and to stay on the straight and narrow.

One of the important things to bear in mind when you’re choosing or developing a strategy is that you’ll need to be able to apply it consistently.

If your strategy involves hours of technical analysis … or checking stats on dozens of markets – are you really going to be able to maintain that level of work?

If you’re in any doubt about it – keep it as simple as possible.

Trading strategies don’t need to be complex. The Time-Shift Trader strategy that I mentioned at the beginning of this email is about as simple as a trading strategy can get – and it proves that you can take advantage of market moves while giving up a minimum of your time.

So, what are the bare bones that a trading strategy needs?

Here’s a checklist of questions that any trader should be able to answer …

• What are my criteria for entering a trade?
• What markets do I trade?
• What are my criteria for exiting a trade?
• How much will I risk on a trade?
• What times do I trade?
• How will I monitor my results?

If you can’t answer every one of these questions – then you need to stop trading now, and formulate your trading strategy properly.

Without a trading strategy, you can’t have consistency, risk management or measurable results. And these three things are vital if you want to have a predictable rate of success. Taking random stabs at the market might give you a few winners, but over the long term, you’ll never progress with your trading, and will inevitably lose money.

If you want solid evidence that trading ad-hoc is going to lose you money, do a quick Google search on “Kahneman and Tversky”, two psychologists who’s research into behavioral economics clearly shows that we shouldn’t be trusted alone in the markets!

Until next time,

Mark Rose

P.S. “Time-Shift Trader has provided me with a methodology which makes sense – takes advantage of either up or down movements in Dow and allows me to set up a trade in 5 mins then get on with other stuff. I’m sure I will be a better trader because of TST.” Steve Watts, Milton Keynes

Click here to test it out for yourself

Related posts:

Systematic trading strategy A DIY trading strategy