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A trading strategy (also called trading system) is a set of rules that tell the trader when and how to enter and exit the market. These rules may be a loose guideline or a strict process detailing the rules of entering a trade, how long to hold the position and the manner in which the trade is exited.
System Trading quite simply refers to the repeated application of a trading strategy. The ultimate goal of a system trader is to identify a process that is profitable and replicate it over and over again maximizing profits and minimizing losses.
At MSS we not only provide access to buy and sell strategies, but we also educate traders on the principles and benefits of diversification, position sizing and money management. We believe these aspects are as important to the trader as the strategies themselves.
We
have posted on our workshop page
a series of basic principles of developing trading strategies,
along with some working system examples.
Types of Trading Strategies.
There are literally thousands of different types of trading strategies and they all vary in the way they handle the entry and exit of a trade. Some are very complex involving many rules or parameters based on technical
indicators, often analysing market conditions before deciding on what type of trade to take. In contrast others repeatedly search for the same basic pattern or occurrence involving simple rules for entry and exit. Other trading strategies will combine technical and fundamental factors to set the parameters or rules of for the trading system.
Who uses a Trading Strategy?
Every trader will at some point use a trading strategy, whether it is a loose game plan or a predefined set of exact rules. Experienced traders will use different types of trading strategies and will modify or develop their systems throughout their trading career.
Novice traders on the other hand are often the ones that do not use a trading strategy. Many hold the belief that it may limit their opportunities and reduce their profit potential. Studies and
our own experience have indicated that this is often false and many novice traders
can lose a significant amount of money before learning the value of having a well formulated trading
plan.
Automated system trading
Eliminates human error and
modifies the emotions of fear and greed, usually the greatest enemy of
an investor, and often the reason many traders fail to
capitalize on potential opportunities. Automating, or
retaining a good Advisor, improves capacity to run multiple complex strategies and take advantage of opportunities
that busy investors are usually unable to handle.
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