One of the biggest challenges facing traders today is the abundance of financial products and services.
The New York Times recently printed an article headed: “Too Many Choices:A Problem That Can Paralyse.”
Here is man’s dilemma; we are attracted to product lines that are full of choices. However because there are just too many offerings to choose from, we cannot make a decision or it becomes too complex. Things get put off and become untimely.
However, when man is presented with a guideline or categories, we go through the process like a champ and take action all of which is timelier.
In our affluent financial markets having so many products is a natural result of the prosperity but too many choices has its frustrating elements, like opportunity cost, buyer’s remorse and decision making paralysis.
So I understand how traders may feel frustrated in the face of this plus all the “two bit” advertising that go along with much of it.
I have produced a track for traders / system developers to run on, a set of categories that tell you how to simplify and compartmentalize. All systems must do two things.
The system must fit your understanding of how the markets operate in other words fit the style you want to trade.
The strategies track record must fit your risk reward criteria, your trading policy. (e.g., a profit factor of 2 or better and trade no more than 12 times a month)
Keep in mind CBI may not have a system that fits your style or criteria, but this track is something you can take with you and use to your benefit.
The more “Aggressive” is the more activity it executes. The less a system trades the more Conservative it is considered. And somewhere in between it is Moderate strategy.
Day Trader (intra-day trading more than 2 trades a day, everyday) can be labelled aggressive when an exit MOC Day Trader is seen as moderate(1 &1/2 trade a day 4 times a week) to conservative ( 1 time a day 2 times a week).
Daily Swing Strategy (Any system that holds past the close into the globex session is a swing trader). An aggressive Swing trader would be 6 to 7 times a month for positions that last 1 to 3 days, the Moderate Swing will trader 3 to 4 times with holding periods of 1 to 3 days.
A trading strategy / method can be robust or specialized. That is, it can trade generically well over any liquid market or it is specialized to only trade a particular market or segment, but not both ways.
Trading Concepts: There are six (6) basic types of systems: Bar chart pattern (flags, pendants, etc.); volatility-expansion or breakout; trend following; momentum driven, trading range or anti breakout and change of trend direction.
Too many traders fall into the trap thinking it’s all about net profit track record and that profits will cure everything. That is true if you are able to live through it. What they are missing is that they may not be able to take the way the system takes its losses.
I feel strongly that like Dirty Harry said “A Man needs to know his limitations,” Put to use Man’s categorical mind.
Please join us with your comments.
Great and Many Thanks,
Jack F. Cahn, CMT