Swing Trading Strategy - Part 2
WHAT MAKES A REALLY GOOD TRADING STRATEGY?
In part I we looked at the importance of using a strategy that fits with your own "trading personality" and the
fact that you must trade your strategy without overriding it through fear and greed
The Stock's Personality
BUT when it comes to building a really effective trading strategy, there is one other vital ingredient that many traders forget - and that is to fully understand the "personality" of the shares or index you trade.
Some traders specialize in say, gold or Brent crude or currencies or they might
specialize in a particular index such as the
FTSE 100 or the Dow Jones but many traders choose to trade shares.
Indeed some traders dabble in a bit of everything. I think this is the area that causes many traders to
fail or at least not reach their full potential.
In my view: You absolutely MUST
I am sure that on the surface most people would say that sounds sensible
but here is why it is a MUST!
Superficially, many charts look the same. I bet if you had not seen the charts for some time and someone where to show you a chart of Brent
Crude over 6 months and then a chart of Barclays PLC over the same 6 months you would be hard pushed to say which was which purely on the look of the chart.
However, I bet
that if you found a trader who trades ONLY Barclays day in and day out and also found someone who trades ONLY Brent Crude day in and day out, both of them would easily identify
which was which.
Because every share, index or commodity has it’s own "personality".
Some will be volatile intra-day, some will follow their sector or
main index (market followers), some will do their own thing, some will spike up and down regularly, some will stop at key moving averages and some will just plough through. Some
will move by 5% on average before they retrace and some by 2%. Some will gap up or down regularly, some will not. You get the idea!
Therefore, no matter how good you are at
analyzing indicators, moving averages, trends and patterns, the same strategy WILL NOT work for everything. A strategy that works well for Bovis Homes, for example, might NOT to
work for BT Group – they have very different "personalities".
The Key Ingredients Of A Good Trading Strategy
So let’s return to our question: What makes a really good trading strategy?
It is a combination of:
1. Your trading personality including attitude to risk and whether your trading decisions are based on strategy or emotion (fear & greed).
2. The "personality" of the
index or share must be profiled, understood and complement your strategy.
3. You must identify the most reliable method of determining entry point, initial stop loss
position, trailing stop and exit point for that share or index "personality".
Then comes the most important bit.
ALL of those things must fit together perfectly.
Imagine if you had a Rolls Royce and the garage called up and said, "You need a new set of pistons but don't worry, we'll fit a set of Toyota ones, they're cheaper." One component
wrong and the whole thing becomes useless!
A good strategy MUST have EVERY ingredient working perfectly in harmony to:
** Work in all market conditions.
money whether the market is going up or down.
** Fit comfortably with you so that you don't override it.
Trading a strategy and sticking to it religiously is the
ONLY reliable way to make money consistently in the markets and with the volatility in recent times you MUST look at smaller but more reliable and consistent profits.
Developing a strategy like this is very tough believe me. It has taken me over three years of design, testing, re-design and re-testing to get there. Add to that a great deal of
anguish and pain (even tears at times) as well as a lot of money and it's not difficult to see why most traders make an overall loss and even give up before getting it right.
But if it were easy, everyone would be doing it right?
Fortunately I got there and now trade full time for a living - AND LOVE EVERY MINUTE OF IT!!!!!!!
strategy I trade is actually quite simple (most good things are) and all I have is just 6 trading rules to follow but it earns me excellent profits every month.
If you want
to shortcut the process of developing a reliable strategy for yourself and save the time, pain and expense that I and most other successful traders went through, I would be
delighted to let you trade my strategy. I will even provide one month of free email support for you.
Every detail of my strategy which I trade on a daily basis is in my book
"Short Swing Trading".
Here is what Paul Manley (a trader in the UK) said about Short Swing Trading:
|"It was very refreshing to read your book, I must say that of all the books I have read in the last 6 years, this is probably the most complete, informative,
practical and no nonsense approach, to trading I have seen. It's a pity I did not have this 6 years ago, it would have saved me a lot of money and even more time."
If you want to hear what other traders have said, and get all the full details of this strategy please visit Short