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Computers are among the most common pieces of equipment that traders use. Unfortunately, the vast majority of traders are engaging their computer to enter into trades, without engaging their mind to think! There is a huge difference between buying a computer trading system and sitting down to do the research to develop your own computer-based trading system. Any computer-based trading system that you buy might be profitable (in sales or trading) to its author; however, to a trader that is not intimately familiar with the research behind it, and why the rules exist, the program is basically worthless. |
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The vast majority of successful traders developed a methodology by building their own trading system from the ground up. As they devise their trading strategy, they very well could have used indicators, beliefs, and subsystem rules by purchasing them, studying them, or learning them from a more experienced trader. The distinction is that until the techniques have been verified, studied, and invariably modified, the trader will not use them. Only after constant experimentation with the new idea, and after verifying and internalizing, and then deciding that the idea is valid and valuable, does the trader add the new concept to his or her methodology. |
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What steps do you think has to happen for traders to develop a personal trading methodology? |
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1. Traders must first determine how they will perceive the way the market operates. They need to develop a metaphor and beliefs that accurately describe the market action in their minds. |
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2. They must then have the beliefs that allow them to perceive consistently recurring market events. |
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3. These events must be consistent, identifiable, and quantifiable. They must be instantly identifiable in the future. |
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4. Traders must test these events to determine their validity and probability of repeating. |
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5. After all the research, validating, and probability studies are done, traders will sit down and write out their methodology. They will make a commitment to a methodologyto always trade by its rules. |
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6. Traders (or their programmers) will sit down at a computer and attempt to write a trading program that incorporates as much of this trading methodology as possible. |
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7. When the program is done, traders are able to tell quickly what action they must take. The important point to realize is that the traders are now intimately familiar with all the related studies. |
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