Trading Strategies

Some Market Definitions:
Bear: What your trading account will be when you take hot stock
tips based on your barber’s advice.
Bull: What your broker uses to explain why the stock you bought
went down.
Bull Market: A random market movement causing an investor to
mistake himself for a financial genius.

I’ve touched upon this subject already, but a tested strategy is the cornerstone
of successful trading. It forces you to make predetermined
trades, thereby reducing your chances of making stupid mistakes. What
I refer to as a strategy is the part of the trading plan that produces your entry
and exit points. It’s either the system you use or the process you use to
come up with your trades. If you prefer to think of it as a trading system,
go right ahead. It is just one part of the more elaborate trading plan, which
also contains risk and money management, but for now let’s just focus on
the actual strategy.


In order to be able to implement a game plan you need to have a repeatable
process you use to make trades. Whether it’s systematic or discretionary you should still have a set of procedures you follow to make trade after
trade. You need not be limited to one strategy. You may have a different
strategy for trending markets than you do for a choppy market. However,
you then need another strategy to help you figure out when a market is
choppy or trending. You can also have a strategy you use when news makes
a market move that overrides your normal trading strategy. You could even
have strategies that are unique per individual market.
As you already saw there are many different styles of trading. Well,
the same holds true for strategies, though developing one is much more
difficult than figuring out your style of trading. Your style and habits will
come naturally to you. You just need to be aware of them as they do. In the
long run it’s your style of trading that will determine your strategies. The
strategy however is something you have to work at and develop and back
test over and over again until you get it right.