I always suggest you to make your own trading system. It is because you know your self best. In other words, you should be the best person to know what match your stock trading’s needs the most. Of course, there are many the ready system (free or paid) available that can be utilized for stock trading. By using the ready system, we do not need to create our own anymore. In other word, it saves our time.
As stock trader, you should have heard about Trading System. You should have known that the trading system is very important to make profitable stock trading. In other words, by having trading system, we can make profit consistently in our stock trading venture. Therefore it is a must for us (as stock trader) to know what exactly is the trading system so we can utilize it to make money in stocks.
As per definition, trading system is a set of trading rule or method which is organized, regular, and repeated.
As per definition above, in stock trading term, having the system means that we do stock trading with the fixed rule or method that we strictly follow several times or more regardless the changing in the stock market condition. We should strictly follow this rule or method during the trading. We can only change or modify it after the trading ends.
However, we should not change it too often so the system can be proven in various stock market situation. It needs to make a reliable system by using it in various condition. In here, we can also call this system as trading plan since it is about how we plan to do our trading before we start to trade. It is the detail plan about how we do our stock trading from start to the end indeed. Now, we should already understand what is the trading system or trading plan based on its definition.
For more understanding about it, let’s discuss what is the trading plan based on the practice. Let’s say that we have USD 1000 to be spent on the stock trading. If have the system (or the plan), we should know how to spent the money exactly. The system will tell us:
- How much we should use to buy the stock
- How much we should have it as reserve
- When to buy the stock
- When to hold the stock
- When to sell the stock
- How much the target profit
- How much acceptable loss
- What kind of stock that we can buy
- What kind of stock that we cannot buy
With points above, it can be said that we have a business plan (in concrete way) how to do stock trading with USD 1000 in the right way. In here, the right way means that we have the detail plan how to consistency make profit more than the loss. It mustn’t a big profit but enough for a tiny profit but consistent more than the loss.
In here, by not having this trading plan, it can be said that we plan to be fail for sure. It is because, without the plan, we do stock trading as gambling – not as business. Without trading system, we can only follow our feeling or people’s recommendation which is very dangerous since we do not have or know the essence for sure.
As conclusion, trading system is a must for stock trader if see the stock trading as a business – not as a gamble. The trading system can help us to do stock trading in the right way hence we can make money in stock with optimum result. In here, the trading system talks about profit consistency – not about one time big hit of profit. It is okay for tiny profit as long as it is consistently more than the loss.
Have a profitable stock trading by having trading plan everyone!
Previously, in my old article, I have stated that the stock market trading is all about the trends. And recently, in Stock Market’s Cycles article, I mentioned how important the stock market (as well as economy) cycles are. So, in here, we have two the most important things to be known as stocks trader (as well as stocks investor) which are Stock Market Trend and Stock Market Cycle.
“The movement is always in cycle. Therefore there is an up as well as a down in everything”
Words above has been repeated for many times and still not lose its essence and still applicable for many thing in this world. As stock investor and traders, I have seen the truth of this words via my activities in stock market. In my early stock trading, I see the cycle in world economy condition. There is a time in where an economy condition is in bad shape as well as in good shape. There is no forever in economy condition. It always moves as like cycle, sometimes up and sometimes down.
As mentioned in previous article about Technical Analysis (TA), The modern Technical Analysis is based on Dow Theory. Therefore understanding the Dow Theory would be a great help before we learn about Technical Analysis. As you might already know, Dow Theory is created by Charles Dow. He create it by observing the U.S. industrial and railway/train financial market.
Indeed, there are many characteristics of Stocks Market. However, as newbie, it will be hard to know and memorize the entire stocks market’s characteristics – in my opinion, it is even almost impossible. Therefore, I suggest to know and memorize only the most important characteristics. Based on my experience, there are two characteristics which are the most important in stocks market. These two characteristics can be a big help in our stocks trading venture.