Trading is a very personal, intimate thing. There is no one size fits all. A strategy that works very well for one person is not going to work for another person – not even if it is 100% technical, as waiting for the perfect conditions to enter a trade, the conditions themselves, and the time one has for execution depending on the timeframe, add a lot of room for failure.
In fact, I would say there are as many systems as traders in the world and no two traders will ever execute the same strategy in the same way. What does that mean for you?
Firstly, whenever you start trading a system that was not developed by yourself, be prepared to make adjustments to it. Take the things that make sense to you, and disregard what does not make sense to you. You actually have to feel your system in order to trade it profitably, and you will only get that feeling for it if you make it your own.
So which are some of the most important traits of a system and of your personality/current situation in life that you should look at when deciding whether the system is for you or not?
- You should consider how much time you can and want to invest into trading a system. Everyone wants to be a daytrader in the beginning but they don’t see that this means long working hours, high required levels of concentration and a lot of discipline, as revenge trading is a much bigger problem for daytraders than for swingtaders. Burnout is always just around the corner as a daytrader.
- Consider your level of patience and emotional control. Can you wait for days or weeks for a trade and can you hold a trade for days and weeks? Against common sense, a low level of patience, in fact, will make daytrading harder for you, as sitting in front of your screen all the time will test your patience much more than looking for setups only at the end of the day.
- Are you a quick or a slow thinker? Are you a good multitasker? If you think slow, daytrading is not for you.
- Do you like solving complex puzzles, do you like to think deep, or do you need a lot of action? Does your system have to generate a lot of signals per time unit?
- Are you a visual person or do you prefer to look at a plethora of numbers? In other words, do you want to trade patterns on a chart or do you look at numbers like volumes, daytimes, and so on?
- How flexible are you, how easy is it for you to change your mind?
- Are you risk averse or are you a risk taker? Do you need instant gratification? If so, a system with a higher winrate and lower RRR and holding times fits you better.
- Which part of the system does make sense to you, and why? Or why not?
- Does trendfollowing or counter-trend trading make more sense to you?
- Is the system applicable to the markets you want to trade?
- Last but not least, do you have the technical equipment required to trade the system, e.g. big screens, fast enough internet, and so on?
These are only a few of the things to consider when thinking about trading a system and there are many more to think about. Of course, before developing your own system, these questions should be taken into account as well.
Apart from that, not only should the system itself be considered, but also your levels of happiness and satisfaction. A system that does not make sense to you will not fulfill you with joy when you catch a winning trade, but it will, therefore, frustrate you even more when you catch a loser. Seeing something play out that you planned in advance grants great satisfaction, but if you don’t even know why a trade should work out or not, trading becomes a guessing game that will drive you insane.
I know people that trade based on concepts that make absolutely zero sense to me, but to them, their concepts are the very fundamental reasons on which the market acts. Whether that is true or not does not even matter, as long as their patterns make sense to them and help them explain the market so it does make sense in their own world. I will keep trading in my world. And you should keep trading in your world, or rather, find your own world, because if you are reading this, very likely you haven’t found it yet.
After all, the markets are so complex, that I personally find looking for an explanation why a pattern works or doesn’t very futile. It is sufficient to me that a pattern works, I don’t worry about why it works. Then again, there are a lot of people that need to find an explanation why they were born, so I guess these need an explanation for why a system works, as well.
It really is up to you. You have to know yourself. Important is, that you are aware of the fact that you cannot just take a system, start trading it, and make money from the get-go. At one point, when you know the system in and out, you will have to make adjustments to it to fully trust it, to make it your own. Because without trust, a system is not worth a single penny, and without adaptation to your own personality, no trust.