Choosing the right trading system and market for you.
How do you choose the right trading system and market?
A lot of traders, especially those who have been trading a while without success, get trapped into thinking that if they change the market or the system they are trading it will change their results. This is not entirely true; however there is some merit to it that most don’t realize.
Every trader has their own specific resources. Resources are things like capital, time, skills, hardware, software, strengths etc. Because everyone is different, it is safe to assume that no two traders will have the same list of resources.
Those that succeed the quickest in trading are the ones that find the right system to matches their resources. Put another way, every system out there being traded has its own mechanics, and unless those mechanics match a traders resources, the two struggle to gel.
Let me give you an example; if I only have $5000 to my name, and the minimum margin requirement to trade a particular commodity such as Crude Oil is around $4000, then for me to take one trade on Crude Oil means I now have 80% of my entire capital tied up in one trade. Now as a complete beginner you may not understand the implications of this, but what it essentially means is that you are limited to how many trades you can have open at one time (simply because the one trade of crude oil has tied up 80% of your account), you are limited to how much volatility you can absorb, and you risk having your entire account wiped out in one trade.
Essentially, if you only have $5000 to your name, you should not be trading a system that trades Oil contracts, regardless of whether or not the advertisement promises 80% success rate.
Another example would be that if you work a full time job and your only free time is in the evening, then you can’t be trading during the day, at least not any markets from your own region. This doesn’t mean you can’t trade short term such as intra-day, it just means you have to find a market from another region of the world that is open during your evening or find a suitable longer term trading system such as an ‘end of day’ stock trading system.
I have seen it often where someone is lured into big promises only to find that the system requires constant monitoring. Because the course was not cheap, the purchaser feels obligated to stick it out and find ways around it, such as buying tools to monitor the markets while they work!
I don’t know about you but this is not how I would want to trade, it is just too risky; however if the trader had done their homework prior to purchasing the course they would have realized that the system was not for them.
Every trader should list their resources and use common sense when selecting a market and system to trade, especially if you are not the sort of person who wants to design your own system.
Happy Trading
Dean Whittingham
Elite Insiders Group - Trading Systems
Financial Market Fisherman © 2004 - 2007
