With starting the category “System” of this blog, I am going to give you a short overview about Trend Trader’s trading philosophy.
People seem to understand very different things when it comes to trading systems. Some main interpretations go like this:
- A formula or an algorithm that puts all trading decisions at its best completely into the hands of a computer, in order to build the most automated trading robot.
- A simple but ingenious trading trick or piece of knowledge that gives its user an advantage, to which all trading behavior than could be adapted.
- A complex description of how to become a better trader or investor.
The first route is the enticing one. Nothing more to be done and the money keeps on rolling in. It looks logical, because you just have to explore the universe of all possible trading methods, possibly again with the help of a computer, and then you have something all others don’t have. This secret is a relatively simple algorithm and as such it can be transformed easily into a program.
So far so good, there is just a little problem. If there is indeed a secret trading strategy, made up of a few parameters of a simple program, it will not remain very long secret. There are large trading houses, creative and hard working programmers, and similar wizards who search with tremendous effort the markets for such auto-traders. Very soon too many exploiters of this regularity will smooth it away. This approach is in my opinion more wishful thinking than anything else.
The second idea, looking for the trading trick, is not much better. It is merely a clone of its predecessor in this little abstract list of trading systems, just without the computerization aspect.
Naturally we arrive at item number three, the one that is not the magic bullet and that still sounds like much work and risk of failure. Right! Think about it, if you expected it to be easier, you will eventually find that a market consisting of many smart participants inherently means the opposite. Making money with trading and investing can’t be as easy as hoped by admirers of the first two magic money ways.
Consequently the Trend Trader system is only a type 3 trading system. It tries to embrace some powerful trading patterns, but it concentrates on the individual trader who has to apply these in varying market situations, executing a trading strategy so that it actually works. So far I have not been able to create the magic bullet system consisting of a very few mechanical things.
In order to make it better understandable what is wrong with the first two approaches, I plan in the category ”System” to introduce various great traders, interesting trading systems and also pieces of them like type 2 trading methods and compare all these with the Trend Trader system.