Prashanth
24th July 2009, 02:11 PM
Hello,
In the previous post, I said that a trading system should suit one's profile - the philosophy behind the system. This is a very important thing to do since we cannot possibly do everything in a single system and hence its better to concentrate and excel in a single part where we can can build our domain knowledge extensively.
So, what do I mean by Philosophy of a Trading System. While as a trader / investor, we seek to be in every area, Trading / Scalping / BTST, Long Term, etc, the goal of a trading system in comparison should be single. The reason is simply that different trading methodologies require and provide different time frames, Risk Reward ratios, Draw Down's etc. In short, a trading system should suit the investor’s risk tolerance
That is depending upon which area of Investment / Trading you prefer, goal should be to develop a trading system suitable for that kind of risk profile and time frame. If you are a intra-day trader, your aim should be to identify stocks that are moving and latch onto them as early as possible. Inversely, if you are a Investor, your aim should be to buy the best stocks say on either BTST or if that is not suitable for you, aim for a weekly rotational based system.
Choose a market / stock / index that is appropriate for your experience level and trading style. Also consider factors such as capital requirement, volatility and liquidity. For example, a person trading mini nifty contracts will have a hard time adapting to trading say Unitech futures since risk rewards greatly vary between the two of them.
Do note, I am giving the aims purely from my perceptive and it can differ widely from yours. I am giving the same for ease of explanation rather than it being some written rule.
But the moot point is simple, take enough time to decide what is suitable for you. Because, building a system takes a lot of time and effort and after doing that if you find that the system does not confirm to your requirements, it will just be a wasted effort (I would not say its fully wasted since you would have learnt a lot of things while building the same).
Successful investing is 40% risk control and 60% self control. As such, the investor’s psychological profile may be the most important factor in contributing to investment results. Therefore, it is reasonable to conclude that an automatic trading philosophy becomes a paramount element in the trading system to reduce subjectivity and increase objectivity in the ever changing market conditions.
Somehow this post does not seem to provide justice to the topic I have chosen but I hope that I have been able to clarify somewhat why the philosophy is important before we venture into building a system. I myself have dealt with everything and finally settled on trading only Nifty as a result of which my first system was build to trade nifty.
Building a trading system requires a lot of time / effort and money before we can succeed. So, choose what is best suited for your profile.
Cheers
Prashanth
--
http://www.niftytiming.com
"Discipline is the bridge between goals and accomplishments"
In the previous post, I said that a trading system should suit one's profile - the philosophy behind the system. This is a very important thing to do since we cannot possibly do everything in a single system and hence its better to concentrate and excel in a single part where we can can build our domain knowledge extensively.
So, what do I mean by Philosophy of a Trading System. While as a trader / investor, we seek to be in every area, Trading / Scalping / BTST, Long Term, etc, the goal of a trading system in comparison should be single. The reason is simply that different trading methodologies require and provide different time frames, Risk Reward ratios, Draw Down's etc. In short, a trading system should suit the investor’s risk tolerance
That is depending upon which area of Investment / Trading you prefer, goal should be to develop a trading system suitable for that kind of risk profile and time frame. If you are a intra-day trader, your aim should be to identify stocks that are moving and latch onto them as early as possible. Inversely, if you are a Investor, your aim should be to buy the best stocks say on either BTST or if that is not suitable for you, aim for a weekly rotational based system.
Choose a market / stock / index that is appropriate for your experience level and trading style. Also consider factors such as capital requirement, volatility and liquidity. For example, a person trading mini nifty contracts will have a hard time adapting to trading say Unitech futures since risk rewards greatly vary between the two of them.
Do note, I am giving the aims purely from my perceptive and it can differ widely from yours. I am giving the same for ease of explanation rather than it being some written rule.
But the moot point is simple, take enough time to decide what is suitable for you. Because, building a system takes a lot of time and effort and after doing that if you find that the system does not confirm to your requirements, it will just be a wasted effort (I would not say its fully wasted since you would have learnt a lot of things while building the same).
Successful investing is 40% risk control and 60% self control. As such, the investor’s psychological profile may be the most important factor in contributing to investment results. Therefore, it is reasonable to conclude that an automatic trading philosophy becomes a paramount element in the trading system to reduce subjectivity and increase objectivity in the ever changing market conditions.
Somehow this post does not seem to provide justice to the topic I have chosen but I hope that I have been able to clarify somewhat why the philosophy is important before we venture into building a system. I myself have dealt with everything and finally settled on trading only Nifty as a result of which my first system was build to trade nifty.
Building a trading system requires a lot of time / effort and money before we can succeed. So, choose what is best suited for your profile.
Cheers
Prashanth
--
http://www.niftytiming.com
"Discipline is the bridge between goals and accomplishments"