Once again, I have proven quite adept at buying at the high. I did this last week for the trade signal I missed, and it was a double position, so the total loss right now for this one position stands at -$3,080.
YES, I AM A GENIUS TRADER!!!! HA HA HA HA
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The Trading Process - Conduct Preliminary Research - Step 07
(Note: to see any of the previous steps, look for the heading "Trading Process" in the column on the right.)
At this point in the process, you should have a decent Trading Plan, and you should realize that you need a trading strategy with an edge to succeed. So, how do you develop an edge?
Edges are all around us. They can be as simple as trading in the direction of the prior day's close, or as complicated as a multi node neural network based on 5 uncorrelated instruments. The trick is actually finding them, and then evaluating them.
My best edges come from simple market observation ("hmmm, it seems like the market moves up after candlestick pattern X"), trading books and magazines and from other traders (it is amazing how successful traders freely share - maybe it is because we all realize how difficult trading really is). Let your imagination run wild, and your mind will come up with some creative ideas.
A couple points to keep in mind:
1. No idea is bad, dumb or stupid. Be non-judgmental in this phase. Be open to anything. Your later analysis will weed out the bad ideas.
2. Make sure it fits you. If you like trying to pick tops and bottoms, don't develop a long term trend following system. Remember, these are your ideas, so be comfortable with them.
3. Ideas in books and magazines rarely work as is. BUT, they are a great place to start. You can modify core ideas, and create your own winning strategy.
4. Make sure you have the right tools. If you are data mining, make sure you have the right software. If you are looking for patterns, make sure you have an objective way to define and measure them.
Next: A simple formula to help you "see" good strategies.
