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Methods to Trade stocks – is it important? Methods to Trade - a success of your own!How to decide?

  • Just guess on which way the market is going to go…  Traders look at a chart or some news and decide if they should buy or sell.  If they make money it’s hard to argue that this is the wrong way to trade the market.  But the problem with this is it’s almost impossible to reproduce results consistently.  It is NOT a method!

  • Traders who apply methods to their trading inevitably have better results.  Using the same criteria to each trade gives you a reference point from which to work.  If you are losing you can then change specific things in your method to find a better criteria.

  • The methods trader can have clear directions for trading actions but there remains a chink in his armor; As the decision to make a trade remains, there is still the human factor.  Although the methods point to specific actions, the trader still has to make the trade.  But if he/she decides to not make the trade for some psychological reason, therein lies the weakness of the methods trader.

  • The solution is to make methods mechanical as much as possible. Then there is no emotion involved with the decision.  If the system says buy the stock then you buy or an order is automatically done for you.  This takes away all the emotional up’s and downs… all you have to do is buy the system and supply the money.  Some camps say it is a waste of money, others say it is the golden goose.

  • Which is true only the individual can answer.  Trading, just as in life, there are no correct ways to trade, only what suits the individual.  Nothing will beat your own research and hard work, developing your own methods.

  • All trading regardless of time frame and strategy involves risk of loss of funds.

  • The rate of learning is directly related to the rate of exposure to trades.  But, regardless of time frame and strategy, you shouldn’t be trading live until having proven success on a demo/simulation platform.

  • Your only objective as a stock trader is to make a profit.  A combination of skill and luck will determine the size of your profit and loss.

  • Charts are the preferred tool of many experienced, successful stock traders.  An enormous variety of market signals may be read from charts.  The simplest signals, however, are often the most profitable.

  • If you want to trade using charts, the best way to do this is with trend lines.

  • Any fool can buy stocks, but it takes an expert to sell.

  • Great investors generally cut their losses early and let their winners run.  So if their average loss is only 10%, and their average winner is over 30%, then even if they have two losing trades for every winner, then they’re still up by 10% across those three trades.  This is a good example of a winning system, and it’s actually a stock trading strategy that’s wrong 67% of the time.

  • Why should a novice trader use a system or strategy or methods someone else developed and tested? That’s easy.  A novice does not need to study how the market works or how he interacts with that market. He does not need to educate himself; he does not need to bother with books or seminars.  He does not need to test the system, since the seller has already done that for him and reported promising hypothetical or actual results.

  • A novice trader hopes to get a trading system at a ‘bargain’ price… sometimes even for free.

  • Hazards of trading a system or strategy developed and tested by someone else are the following: Many legendary traders have reported that 95% of the profits may come from only 5% of the trades.

  • Faulty Systems – there are many faulty systems out there.  They may be faulty because their assumptions and their mechanisms may no longer be true, accurate or valid.  As a novice trader, how can you distinguish between the good systems and the bad systems if you don’t know how trading systems are built?

  • Discipline and confidence – unless the user knows WHY the rules for the system are in place, he/she will not have the discipline to follow them.

  • The irony is that for a trader to know which system to purchase, he/she must first learn how to create a system.  And after knowing how to create a system, there will no longer be the need to buy one.

  • If you are looking at a system with a 50% success rate, the odds are high that it will have at least five losers in a row at some point.

  • In conclusion then, if you are not inclined to learn how to develop your own trading methodology, then perhaps you should consider giving your money for someone else to invest.

 Goethe said it best, “whatever you can do, or dream, begin it.  Boldness has genius, magic, and power in it.  Begin it now.”  But wait, you say, even though he says “begin it” twice to you, “…I’m not ready.”  Well, you’re wrong, terribly wrong.  You don’t need more experience.  Beginning it is the experience.


What is the Traders Edge?