Trading Systems

To become a successful trader you must have some kind of method or system to follow that will keep you on track. You may be buying and selling on tips, the weather or phases of the moon (there is a system like that).

The two basic methods are based either on fundamental or technicals. In stock the fundamentals take into account sales, gross profit margins, net profit margins, industry growth, management capabilities, price/earning ratios, etc. In technical analysis you would be computing various moving averages (such as 200-day, 50-day 10-day) of the stock price, trend lines, Fibonacci retracement, support and resistance levels, Elliott Waves, stochastics and many others.

There are scores of systems for sale and you can pick and choose among them to see which one suits your bank account and personality. Your choices will range from long-term to day trading. One thing for sure ? don't buy any system that does not have a good exit strategy. Understand that many systems will trade frequently with small losses, but any method must have a won/lost ratio of 3 to 1 to be profitable. That means over the period of one year you must win $3 for every $1 trading loss. You will learn early in the game to love small losses. Never buy any system that allows big losses.

There is a magazine published every other month called Futures Truth that prints the trading record for about 200 commodity systems. A great way to find the best systems without losing your money.

Most of the systems you find will be based upon some kind of strict mechanical entry and exit computation and will need computer software that you will receive when you purchase it. The software vendor may even provide you with a broker who specializes in trading their method.

The reason many of these mechanical systems do not have a better ROI (return on investment) better called ROS (return on speculation) is computer systems adhere to a strict formula for their BUY/SELL signals. They cannot give you a "maybe" because computers don't understand maybe. There is no subjective influence at all. The latter will have both positive and negative results on your returns. Most people don't want any subjectivity and prefer to follow what the computer spits out whether right or wrong; it relieves the trader of the responsibility of the decisions.

There are many professional traders I knew when I was an exchange member who traded strictly on "feel" and I know many who made six figure incomes doing it.

Many people start with a professional system and will tweak it to better fit their personality. This is very common, but requires personal discipline to remain with those alterations. You can't be changing all the time.

Whether for stocks, funds, commodities or whatever you invest you must have an organized trading system that has a good exit strategy. Whatever you buy it is the exit method that will help you keep the profits you make. To be a successful investor you must have a system.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

---

Precision Money Management

This article describes the model of a natural relationship between... Read More

E-mini Day Trading - Day Trading for Beginners - Stock Market Timing Software

I mean it when I say that. While plastic silverware... Read More

A Funny Thing Happened on the Way to the Stock Market

On the 40 year journey through the turmoil of a... Read More

Investment Capital Gains

Have you bought any mutual funds this year or late... Read More

Overvalued & Underbought

With all the bad news that has been dumped upon... Read More

Investment Research - The Dalbar Study

Very few people, even professionals, have heard of the Dalbar... Read More

The Right Mutual Funds For Baby Boomers

If you are a baby boomer, time is not on... Read More

How Commodity Trading Differs from Stock Trading

There are major differences between trading stocks and trading futures.... Read More

How to Read an Annual Report

Every publicly traded company is required by the SEC(Securities and... Read More

An Old Proverb for Investing

"If you don't know where you are going, any road... Read More

Buy and Hold Investment Strategy

"Buy and hold" is one of the most heralded investment... Read More

The Stock Market - Part 1: Believe It Or Not, Its Always Been Your Best Friend And Always Will Be

Regardless of the fact that the world's stock markets have... Read More

Investment Attorneys and Garbage Stocks

How is it possible that trash Companies are posting less... Read More

You Don?t HAVE To Be Trading

As a novice trader, you'll often feel the need to... Read More

Stock Analysis

I receive emails from Morningstar. This company provides statistics and... Read More

The Inside Scoop on Mutual Fund Rip Offs

The bear market that showed up at the end of... Read More

Basics of Stock Market

Financial markets provide their participants with the most favorable conditions... Read More

Small-Cap Stocks: The Beginning of the Journey

When an individual investor wants to roll up his sleeves... Read More

Whos Calling?

Its dinnertime and the phone rings. It's Joe Noname with... Read More

Stocks & Oil, Sat Jun 18th, 2005

Both the stock market and oil prices rallied recently, which... Read More

Dollar Cost Averaging

Dollar cost averaging is one of the most popular ideas... Read More

How Much Information Do You Need?

You have decided to buy some stock or mutual funds,... Read More

More Window Dressing

Two weeks ago I wrote about what the Securities and... Read More

Lemmings Are Gathering

Before they go over the cliff to their destruction these... Read More

Box Of Chocolates

Ever have one of those sample boxes of candy? Each... Read More

Finding A Good Stock

One of the things people are always asking me is... Read More

Your Trading Objective: Why is that so Important?

You've decided to try your luck at trading stocks or... Read More

A Penny for Your Stocks

According to Investopedia Inc. the penny stock market has seen... Read More

Peer Groups

Whenever I see mutual fund comparisons in the trade publications... Read More

How To Buy And Hold

One of the most believed bits of conventional wisdom from... Read More

Who Knows?

The Shadow knows. Remember him? It seems a shadow has... Read More

Wal-Mart: Discount Store, Discounted Stock?

As GuruFocus updates the stock buys and sells of gurus,... Read More

Trend Trading - Trading Stocks Using Technical Analysis and Swing Trading Strategies

Peter is a professional trader, Paul is not. Peter has... Read More