The previous chapter was about knowing your style of trading. And though
it was short, it is oh so important, because you need to develop a strategy
that complements your trading style. If not, you will not be able to follow
it as well as you should. Your trading strategies should fit both your unique
risk adverseness and your trading preferences. If you are a low-risk person
then you will not be able to mentally trade, like a high-risk taker would, and
will get scared out too often, possibly breaking the rules of the strategies
should they call for holding through large drawdowns.
Coming up with the right strategy is something that is not so straightforward
at the beginning. You need to actually trade for a while and gain
experience, while at the same time experimenting with different —and possibly
bad—ideas and strategies, some of which may work and some may
not. It is not until after you have done this that you can decide on the style
and strategy that you are most comfortable with and that works best for
you. It is natural to trade confused at the beginning, and you may not be
profitable during this learning period, but chalk it up to the tuition of trading,
which you are paying to learn how to trade. It’s in this period that you
are developing trading styles, strategies, money management skills, and of
course your overall trading plan.
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