Thursday, December 4, 2014

Personality and Trading Systems

While there is no single correct way to trade the markets, in order to be successful, one needs to find the way that is right for him - a methodology that suits his personality. This observation seems very logical to the point of sounding very obvious. We might even wonder, “Doesn’t everyone trade in the line of their personality?”

Actually, NO!
And this is what would also explain why most people lose money using trading systems they bought. Why is that true? Is it because most trading systems work on data not used in their development? I don’t mean that. Not just that, I have no idea what percentage of those systems provide a market edge. But even if i assumed that more than 50 percent of the systems sold would be profitable if applied as instructed, I would still expect 90 percent of the buyers of those systems to lose money trading them.

Because every trading system, regardless of the strategy employed, is going to hit periods when it does poorly. Now, if you buy a one-for-all system, it has nothing to do with your personality of beliefs. In many, if not most cases, you won't even have any idea what drives the system's signals. Consequently, the first time the system hits a bad period, you may not have the confidence to stay with the system, and might even stop trading it. That is why, invariably, most people who buy systems will end up losing: They will stop using the system when it goes through a bad period, and they won't be there when the system recovers.

That is why Trading our own Personality becomes so much important. And that is what Successful Traders have done: found a methodology that fits their personality.

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