Many individuals are drawn to trading thinking they won’t have to do math. This belief is rarely held by successful traders, and few actually succeed in modern trading without some math skills.
After finding rules that work, many traders are tempted to optimize the parameters. This is easy to do, and is the beginning of the end of many solid trading plans.
After deciding which markets and what timeframe are right for you, the next step is to come up with the rules for trading.
Let’s start with the bottom line. When starting to trade, it’s best to plan on committing at least an hour a day as the minimum time required for success. If you don’t have that much time, then a system based on weekly, or even monthly, data might be a better entry level strategy.
Designing a trading system is simply a series of decisions. First is deciding what edge you have over all the other players in the market. This isn’t as difficult as it sounds. Using a logical approach to the markets, any individual can develop a unique insight that lets them profit.
To be successful in trading means that you make money and the most important rule new traders must understand is that it’s more important to make money than it is to be right.
Blackjack players at a casino will spend a lot of time deciding how much to bet on each hand. At least the serious ones do. Often, they even have a system. Traders may be surprised to realize they might not be as well prepared as savvy card players.
Traders buy and sell for a variety of reasons. Some traders will make decisions based upon news headlines or gut feelings. One may read that gasoline prices are at record levels and decide they have to go down, while with equal certainty another trader decides the news justifies even higher prices. These strategies rely on luck, rather than mathematical probabilities, to succeed.