"Human beings never think for themselves, they find it too uncomfortable. For the most part, members of our species simply repeat what they are told--and become upset if they are exposed to any different view. The characteristic human trait is not awareness but conformity...Other animals fight for territory or food; but, uniquely in the animal kingdom, human beings fight for their 'beliefs'...The reason is that beliefs guide behavior, which has evolutionary importance among human beings. But at a time when our behavior may well lead us to extinction, I see no reason to assume we have any awareness at all. We are stubborn, self-destructive conformists. Any other view of our species is just a self-congratulatory delusion." - Michael Crichton, The Lost World

Thursday, December 14, 2006

What is a Complete Trading System?

Many people think they have a trading system, but what they really have is an entry signal and not much more. A complete trading system has at least the following components:

  • Objectives
  • Hypothesis
  • Market Selection
  • Instrument Filter
  • Setup Conditions
  • Entry Signal
  • Position-sizing
  • Maximum Loss Stop
  • Profit Protection Stop
  • Exit Signal

It may also have the following optional components:

  • Scaling in and out rules
  • System suspension rules (when condition are not favorable)

Note that the objectives are actually part of the system. Unless you clearly define what you are trying to achieve, it is very difficult to design a successful trading system, and even harder to implement it accurately.

Paul King

PMKing Trading LLC

Source: http://www.pmkingtrading.com

Posted 1:54 PM

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