Why Go for a Trading System?
Trading involves money: real, hard earned, money. Whether you trade in the stock market or the Forex market you stand to lose as much as you stand to profit. Unless you are in it simply to throw money away, you will need a plan. Yes, the trading depicted in movies are exciting and are seemingly based on instinct and gut-feel. However, real trading, in a real market needs a strategy, a plan, in order for it to work. This is why you need a trading system.
The best thing that a trading system will do for you is to save you from your emotions and sentiments. One of the most common downfalls of traders is when they second guess themselves. Knowing that you will not be able to cope with the loss or getting too excited about the probability of profit may cloud you judgement and cause you to make unwise calls and bad trading moves. A system with rules and markers for you to follow and stick to will keep you from doing just that.
Such a system has a specific design to it. They are specifically tailored to cater to the strategies and moves that traders have in their head to begin with. At a glance, this seems rather simple. However, coming up with a list of rules that can fit on a single sheet of paper takes a long time in lab development before completion.
Moreover, these systems give you a strategy that has already been through a series of backtesting over and over. This means that you will not only save the time in doing the tests yourself but also that the strategy is more likely to work and be successful.
There are different kinds of trading systems out there. One of the more popular ones is the turtle system. The turtle system is named as such because it looks at the slower profits. This system holds stocks for a longer period of time. The idea is the length of time that the stock is held decreases the possibility of selling them at a loss. The standard period is 20 days or so. The name for the system makes more sense when discussed with reference to the swing systems. These systems, in contrast, took at the shorter term profits.
The latter system tells the trader to hold on to a stock for a shorter period than in the former. The holding system is always more than a day but still much shorter than the period for buying and holding stocks for long term profit. The stocks are usually re-sold before the trend ends or changes.
Day trading is the shortest most active of the trading options. The trades, or buying and selling, happens within the day, before the market closes. The number of transactions a trader makes on the same stock within the day is unlimited. The same stocks can be bought and sold within the same minute. These are the most hectic and stressful type of trades but it is also more popular because the amount of start –up capital is also lower, not to mention the fact that this is what most people find exciting.
