Tuesday, October 22, 2013

Commitment and consistency

When starting out and utilising a particular trading system it is very easy to be duped into a short-term view, depending on a small sample of trades. Depending on when you start trading such a system can have a material impact upon those results. For example, starting to use a trend following system during a period when there is a lack of a trend (often combined with a higher than normal level volatility).

Traders often gain confidence in a method as a result of short-term results, however the sample size is way too small to  be relied upon. A system needs to be used over a variety of market conditions (uptrends, downtrends, periods of high and low volatility) - you want the system to be as robust as possible.

Traders also rely on back testing or 'paper trading' a system, however the results of such a test omit a critical component - that traders tend to either override or ignore entry and exit signals, or risk too much much or too little. Would you have the correct mindset to be able to utilise the specified rules when you have physical money at risk, or when the state of the market changes?

Therefore, as a trader you need to resolve to commit to a particular strategy over a reasonable length of time, preferably under differing market conditions, as well as resolutely stick to the rules and parameters. This is why the full mentoring programme membership lasts for a year, so that:
  • you encounter all the varying market conditions;
  • you have full support available, not only relating to entries and exits, but also risk control and on the psychological side;
  • you develop your skills as part of a team of like-minded traders, which accelerates everyone's learning.

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