Having an exit strategy
Whilst the vast majority of share investors, educators, analysts and commentators concentrate on entry signals – when to buy stocks – almost to the point of obsession, fewer still are prepared to discuss appropriate exit strategies. Exit strategies are vitally important to acheive success as an active share market investor. Without an appropriate strategy to […]
The bottlenose dolphin and its edge
This week we take a light-hearted yet serious look at what it means to have an ‘edge’. In the natural world animals develop skills and characteristics that allow them to prosper and survive often under strange and adverse conditions. This process of evolution gives those that develop these skills a survival advantage over those that […]
Designing a trading methodology – Part 8 – A brief recap
Over the past 7 weeks we have had a detailed look at the steps and processes involved in trading system design and development. Briefly recapping, these steps are:- Step 1 – Developing a Traders Mindset, and accepting that losses are just a part of the business. Step 2 – Identifying the tools and resources needed […]
Designing a trading methodology – Part 7 Degrees of freedom and optimisation
In this week’s posting I would like to explore in more detail the concepts of degrees of freedom and optimisation and the impact these two variables can have on the development and outcomes of a trading system. Degrees of freedom in a trading system relates to the number of criteria that are used to filter […]
Designing a trading methodology – Part 6 A winning trading system
Having worked through the processes to either develop and test your own trading system or perform detailed due diligence on a commercially available trading system using the steps discussed over the past weeks, this week we will look at what constitutes a winning trading system. A winning trading system will give you a profitable ‘edge’ […]
Designing a trading methodology – Part 5 Back testing your edge
Having researched and designed your trading system by working through the steps we have discussed so far it is now time to back-test your ideas to see if the system ‘works. Research is conducted via back-testing concepts against available historical data. This is where your programming skills are required, unless you wish to conduct your […]
Designing a trading methodology – Part 4 Entry and exit signals
Having determined the objectives for your trading system and with a thorough understanding of what it is you want to achieve with your ‘edge’ it is now time to look at the entry and exit signals you will use. Specifying exit signals is a must! Too many discretionary traders and those lacking a disciplined approach […]
Designing a trading methodology – Part 3 Specify the objectives of your edge
Having set out on the path of constructing your own trading system, it is now time to consider the aims and objectives of your system. In other words, what you are really doing, and why you are doing it. If you don’t specify what you want your edge to deliver, how will you know when […]
Designing a trading methodology – Part 2Tools and resources
In last week’s blog we looked at the mindset required to begin designing and building your own trading system. This week we take a look at the tools and resources required to undertake the journey. To design your own system with an ‘edge’ over the market certain basic resources will be required. These resources include […]
Designing a trading methodology
Over the next few weeks I would like to focus on the steps and processes involved in designing a trading system. Whilst by no means an exhaustive list, it will provide an insight into the process for those interested in designing their own trading system and for those who are weighing up whether to develop […]