Prashanth
22nd July 2009, 10:06 AM
Hello,
Its the constant endeavor of every market participant to be on the winning side. After all, what is the point in trading / investing in the market if one feels that is difficult or impossible to make money.
Each of us have our own methodology to trade the market. While some use Crossovers, Oscillators, other may use Trendline method, Fractals, Astro among many other approaches. While approach maybe different, the end result is a trade in the market which hopefully results in gains.
My own experience when talking to traders / investors is that knowledge about Trading Systems is quite limited in nature. Even among those who know, many due to multiple reasons are quite unable to take it forward. While I do accept that building trading systems is not a child's play, neither is making money consistently in the market.
Just like a Engineer has to learn new methodologies if he is to remain relevant in the field a Trader / Investor should constantly seek to update his knowledge and overcome the obstacles that he finds in the way if he really is serious about how he trades / handles his money.
Most of us focus on being in the market all the time in the hope that some or the other oppurtunities do come along which can and should be taken advantage of. This in reality is never true since massive market moves happen in the least amount of time frame. Just for example, markets have moved by around 12% in the last 6 - 7 trading sessions. Many a time such gains do not come for months together. Hence, one should first discard the idea (personal opinion) that one should constantly be in the market to make substantial gains.
The reason one should build a trading system is for the simple reason that one can see if his theories have worked previously (disclaimer that something that has worked before may or may not work henceforth is always there). This is most essential since if one is following a strategy that is flawed, chances are that it will come out during the testing phase itself and hence reduce the risk of loosing money in the markets to that extent. Of course, that too comes with a caveat which I shall discuss later.
For a start, whether you are a Investor or a Trader, you need to have a Charting software and a data feed to it so that you can have the historical data of all stocks that you wish to follow. There are quite a number of charting softwares that are available, some Free, some Paid. What you choose depends upon what you are looking for. If you need only charts, any free charting software should do the trick. If you are looking for advanced systems where you can code / modify the indicators, oscillators, etc, I would recommend AmiBroker as the charting software you can check out.
Once you have selected the charting software of your choice, data for the software is your next concern. Multiple sources of data are available and unless you are looking for Intra-day, free sources or cheap source of data (such as www.desitradermall.com ) should suffice. Quality of data is important since decisions are based upon the prices and wrong prices can impact both testing and real time performance very much.
Once we have the minimum required (Charting software + Data), next step is to identify our philosophy of trade. First one has to decide what one wants to do. Do you want to trade as a Intra-day trader or a positional trader or are you a Investor and if Investing, are you looking at short term movements or large term moves.
Philosophy is most important since that defines what kind of trading strategy we should adopt. For example, if one has a full time job, a intra-day extreme trading strategy may not be the best bet since its like placing each leg in different boats and hence can get caught on the wrong side on both fronts.
We generally wish to do all things and benefit everywhere, but that rarely is possible. Hence, first step is to understand what we can do and what we cannot and then move from there. Once we know our limitations and strengths, we can devise what is suitable for us.
I had previously written about what to look for in a Trading System, so I shall not repeat the same but use the same when I next write about different types of trading systems (I had promised to write long back, but somehow never came to write it).
Comments, brickbats welcome :)
Cheers
Prashanth
--
http://www.niftytiming.com
"Discipline is the bridge between goals and accomplishments"
Its the constant endeavor of every market participant to be on the winning side. After all, what is the point in trading / investing in the market if one feels that is difficult or impossible to make money.
Each of us have our own methodology to trade the market. While some use Crossovers, Oscillators, other may use Trendline method, Fractals, Astro among many other approaches. While approach maybe different, the end result is a trade in the market which hopefully results in gains.
My own experience when talking to traders / investors is that knowledge about Trading Systems is quite limited in nature. Even among those who know, many due to multiple reasons are quite unable to take it forward. While I do accept that building trading systems is not a child's play, neither is making money consistently in the market.
Just like a Engineer has to learn new methodologies if he is to remain relevant in the field a Trader / Investor should constantly seek to update his knowledge and overcome the obstacles that he finds in the way if he really is serious about how he trades / handles his money.
Most of us focus on being in the market all the time in the hope that some or the other oppurtunities do come along which can and should be taken advantage of. This in reality is never true since massive market moves happen in the least amount of time frame. Just for example, markets have moved by around 12% in the last 6 - 7 trading sessions. Many a time such gains do not come for months together. Hence, one should first discard the idea (personal opinion) that one should constantly be in the market to make substantial gains.
The reason one should build a trading system is for the simple reason that one can see if his theories have worked previously (disclaimer that something that has worked before may or may not work henceforth is always there). This is most essential since if one is following a strategy that is flawed, chances are that it will come out during the testing phase itself and hence reduce the risk of loosing money in the markets to that extent. Of course, that too comes with a caveat which I shall discuss later.
For a start, whether you are a Investor or a Trader, you need to have a Charting software and a data feed to it so that you can have the historical data of all stocks that you wish to follow. There are quite a number of charting softwares that are available, some Free, some Paid. What you choose depends upon what you are looking for. If you need only charts, any free charting software should do the trick. If you are looking for advanced systems where you can code / modify the indicators, oscillators, etc, I would recommend AmiBroker as the charting software you can check out.
Once you have selected the charting software of your choice, data for the software is your next concern. Multiple sources of data are available and unless you are looking for Intra-day, free sources or cheap source of data (such as www.desitradermall.com ) should suffice. Quality of data is important since decisions are based upon the prices and wrong prices can impact both testing and real time performance very much.
Once we have the minimum required (Charting software + Data), next step is to identify our philosophy of trade. First one has to decide what one wants to do. Do you want to trade as a Intra-day trader or a positional trader or are you a Investor and if Investing, are you looking at short term movements or large term moves.
Philosophy is most important since that defines what kind of trading strategy we should adopt. For example, if one has a full time job, a intra-day extreme trading strategy may not be the best bet since its like placing each leg in different boats and hence can get caught on the wrong side on both fronts.
We generally wish to do all things and benefit everywhere, but that rarely is possible. Hence, first step is to understand what we can do and what we cannot and then move from there. Once we know our limitations and strengths, we can devise what is suitable for us.
I had previously written about what to look for in a Trading System, so I shall not repeat the same but use the same when I next write about different types of trading systems (I had promised to write long back, but somehow never came to write it).
Comments, brickbats welcome :)
Cheers
Prashanth
--
http://www.niftytiming.com
"Discipline is the bridge between goals and accomplishments"