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.

CBI strat­egy categories:

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.

Activ­ity risk:
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.

Trad­ing Style:
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.

Gen­er­al­ity:
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

jfc@traderassist.com