What is a trading system?

What is a system?

System is:

1. a set of things working together as parts of a mechanism or an interconnecting network; a complex whole. 
2. a set of principles or procedures according to which something is done; an organized scheme or method.

So, it is getting a few things that you believe will work and make it work as a group with measurable and desirable outcome/goal.

But you may not know whether it will work or not, you simply testing your believe which derived from your knowledge/experience/believe.

So you try to create a system, it starts with a couple of questions, and you answer the questions by research, copy and paste, and try to follow others. Why? because it is easy, and people like easy, proven, quick.... but it is not yours, it may not suit you, you may not believe it truly because at the first step you don't even understand the logic/assumption behind other people's believe that you trying to copy.

So, don't copy paste. Continue to do research, study more about top traders characteristic, traits, advice for fun learning not money. You start to face yourself in a quiet room, asking yourself

• why you want to trade? in fact, there are million things you can do. What is the reason you want to become a trader?
• are you sure you know what you are doing? what do you have? do you know what you don't have? do you know that you may not aware what you don't have? e.g. knowledge gap. So how to get what is required? So you continue to do research, facing yourself honestly, and have relationship with those knowledge and you finally believe it may work.

There you go, you have your believe. Now is the time to create system.

Referring above, a system is getting a few things that you believe will work and make it work as a group with measurable and desirable outcome/goal.

What is your trading goals (at beginning stage)? is it all about money? pips? behave better in trading?

I don't know about you, i choose behave better in trading as first step, pips a second, and money as third in the beginning stage.

I choose behave better in trading because i want to manage risk and trade with confidence. This is a long haul, not a few trades and i can then retire young and rich.

As I choose life as a trader, I need a map. A map of 1) where I am, 2) where I want to be, and 3) how to get there.

In summary, a trader's map inclusive of trading philosophy (believe, knowledge, rules, mindfulness), trading system (a few tools and resources to get where you want to be), trading plan (how you get there).

• When you travel with a map, you naturally believe the map is trustable and you comfortable to believe the map will get where you want to go (Philosophy). 
• When you look at your map, you will think chronologically that beginning and the destination can be divided into a few steps and you will brainstorm about a few things required in each steps/stage orderly (e.g. walk, take a taxi, fly with aeroplane, then landing and take a train and etc.) - that is called trading system. 
• Once you have the system, you will draft the strategy to manage it at your favour to reach your destination/goal (e.g. review cost, risk involved, feasibility study, research, choosing options available, a few questions, advantages, disadvantages, evaluate your risk-reward ratio, edge of trading, and etc.) then you make decision. - That is called trading plan.

A trading system simply means having a map you believe and plan your journey, more importantly to take a step and action with confident no matter you are right or wrong, that's the miracle of uncertainty and learning progress, or a trading journey.

It is not about the money!

It's about the work 

It's about the consistency  

It's about the dedication 

It's about the perseverance 

It's about the homework, again! 

It's not about the money at all. 

It's how you do your homework 

It's how you manage your risk 

It's how you structure your trading plan 

It's how you journal and review your trades 

It's how you ensure you avoid the same mistake, again!

It's not just about the money on the table 

It's about following your trading plan 

It's about discipline in cutting losses 

It's about sticking to your trading plan 

It's about rules that above the trading plan 

It's about whether you treat trading as your business 

It's not about how much balances in your account 

It's pips that counts 

It's discipline that values 

It's attitude towards trading that matters 

It's the goal to become a better trader after each trade 

It's the job you really want to do even it does not paid 

It's the choice you make to become a great trader

There are many things above that, but you know surely it's not all about the money you will make when you decided to become a great trader. You will never regret!

What is a Good Trade and Bad Trade?

It's interesting to hear how people define success and failure when it comes to trading. 

What constitutes a well thought out disciplined trade? An ill conceived one?

What someone perceives as being a good trade. What someone perceives as being a bad one. 

Here are some guidelines that may help you along. But I want you to think about consistency. After all anyone can put their hard earned money on the table and come up with a winning trade every now and then.

Yet few can balance their wins and losses in a way that keeps them in the game over the longer term.

Key variables that come into play align psychology, attitude and ego. 

Combine these with risk management, position sizing and discipline. 

Which is all then packaged up into methodology, patience and managing your emotions.

So here is a small list of behaviors that are either going to keep you in the game over the longer term, or throw you onto the scrap heap with the majority of traders who have succumbed to the dark side rather than the embracing the light side.

# 1: Successful trades have a strict trading plan that is followed without fail. Unsuccessful trades are made on impulse, gut feel, opinion or ego.

# 2: Successful trades have an exact entry point with position sizing decided before the trade is placed. Unsuccessful trades are made without consideration that you may actually be wrong.

# 3: Successful trades have a predefined loss limit with upside potential unlimited. Unsuccessful trades have open risk parameters and conservative profit targets. 

# 4: Successful trades are taken when your strategy triggers the trade. Unsuccessful trades are made when the fear of missing out overrides everything else.

# 5: Successful trades follow your trading plan even during draw downs. Unsuccessful trades try to recover losses quickly.

And remember, price action is everything. 

It overrides feelings, financial need, personal opinions and inflated egos. 

And above all it overrides greed. 

At the end of the day the market owes you nothing!

Why do you trade?

Have you ever thought about it?

Sure you will say "Of course to make money!"

This answer, however, is only partially correct. Different people set different goals for their trading business, and therefore, trading styles and instruments used vary a lot for different traders. In fact, economic wise, it is also interesting to understand why people trade.

Trading is a hobby and entertainment for some people, for others – a source of additional income, for the third – a way to preserve savings from inflation and exchange rate changes, while some made trading in the financial markets their main profession.

Furthermore, trading in the financial markets is not the only way to earn money. Before you make a decision and start trading you need to understand the advantages that trading has compare to all other ways of money making. Reasons for trading “I need money” Money is never enough. This is an axiom. It doesn’t even matter how much money a person has, it always not enough. Of course, one might be in need of different things depending on his wealth. There might not be enough money for a new phone or a car, a vacation or a wedding, a flat or a villa abroad, the salary for workers or construction of a new factory.

Very often to realize the dream of the whole life’s the only thing you need is money. Sometimes you can take a credit, but it will have to be repaid with interest. Once you invest money into financial market trading, you will not pay the interest, but receive it. Certainly, money is necessary to start working on the market. Some might say that they have no spare cash to invest into trading. But think of the opportunities that financial markets open for realization of your wishes, and it might happen that you will refrain from unnecessary purchases and entertainment to obtain a new source of money for you “I want to save my savings!” Money loses value every day. Merciless inflation chops a bit off your savings every day, and it doesn’t matter where you keep them – under a pillow or on a bank account, and in what currency – rubles, dollars or euro. Bank deposits offer interest that is lower than the inflation’s rate, even if you freeze your savings for a few years. And what about a risk of hyperinflation? While the salary was carried from the company cash desk to a shop, you could already buy less goods.

“Money must work” Money can bring more money. And if they can, they must do it! Otherwise a billionaire wouldn’t be a billionaire. And this rule works whatever the size of the fortune. If you are saving up for a car and you have to save up for one more year, invest the existing amount into financial markets and it will help you solve the problem faster. Even if you are not saving up for a car but rather a new iPhone, you can do the same.

In modern world trading is available even with small deposits. Passion Some traders treat trading like a game of chance. So, “gambling on the stock exchange” is used more often than “working on the stock exchange” justly. Yes, it’s true, trading is a lot like an exciting gambling game. Some traders realize their passion for risks and gamble in trading. However, trading is not poker, roulette, nor is it a casino. Unlike in gambling, where victory depends on chance and luck, profit in the financial markets depends on the movements of various assets’ rates, which can be predicted. Trading compare to other types of making money Trading and a regular job Trading in the financial markets is just as much of a job as any other. But it has a ton of advantages when compared to a job in an office or a factory. First of all, it is you who sets the work schedule; there is a plenty of assets to trade, and all of them are traded in different stock exchanges around the whole world, in various time zones.

With sufficient experience and a worked-out trading strategy, trading doesn’t take up much time. It’s enough for you to analyze the market with ready-made techniques, decide on a deal and make it. Then you will only have to wait to for the result. Secondly, with modern technology and communication devices you can work anywhere –at home, at a beach and even a train, from any computer, tablet and phone. Not being bound up to a work place gives extraordinary freedom. Also a job in the financial markets is a job without bosses, so nobody will tell you what to do and ask for the results. Of course, a job like this doesn’t suit those that can’t find satisfying motivation to work for themselves. There are no subordinates on this job as well, so you won’t have to be responsible for anyone. Though if you want, you can hire subordinates. That’s what some professional traders do: they develop the trading system themselves and hire employees (or computer algorithms) to trade. 

Trading and own business Trading is an own business of some sort. You invest money into your own company to gain profit, and risk your capital in case your business-idea turns out to be unsuccessful. Yes, trading in the financial markets is a risk, like any other business. Setting up a stall with groceries next to your house is a risk. It might happen that your potential clients will do their shopping in a supermarket instead, that your salesmen will filch, or some gangsters will burn it up in the night with all the goods. More than 90% of start-ups in small business end up failing, the same thing can happen in trading. But trading, perhaps, is the most available type of business. It is easy to start and easy to roll up in case of a failure. You risk nothing except the savings on your trade account. Sure, you can lose them, but you won’t have to deal with frustrated clients and enraged creditors.

All in all, once again, trading in the financial markets is a risk, but a reasonable one. And remember no guts, no glory! Trading and bank deposit, mutual funds, management companies You can try to earn money by investing into bank deposits, mutual funds, and management companies. All of those are so called ‘passive investments’. However, the interest rate for bank deposits does not even provide protection from the inflation, mutual funds are limited in assets and trading techniques which means they can only bring profit on an actively developing market plus their profit is much lower than that of an independent trader. You can also entrust money to a professional trader or a management company. But in that case you will have to be able to choose the managing director you can trust with your savings. You can run into an amateur that will show you beautiful yield curves but actually lose your money rapidly. To choose a managing director correctly, you should have at least basic knowledge and experience in independent trading and market analysis. Trading and financial pyramids Financial pyramids have intensified their activity in the last couple of years. Their advertisements guarantee enormous monthly capital gains without any efforts. It seems everyone knows that any financial pyramid is just a fraudulent scheme that always moves the money of hundreds of people to the hands of a small group of people at the top pyramid levels. Still, there are a lot of people that hope they can leave the pyramid scheme with good profit or are under the illusion that they are at the top of the pyramid. When trading in financial markets no one can guarantee any profits. Your income is the result of the trader’s work, his or her knowledge and ability to analyze the market; this income can be big enough if the trader is competent and experienced. You can also have enormous profits if you add your good luck to your knowledge and experience.

The role of trading in the trader’s life Trading as a hobby does not become a major business for both beginners and experienced traders. Some of them treat trading as their hobby or entertainment that helps to keep your mind off your hard everyday work. Others do trading once in a while when they have some spare money or when they need cash for some major purchase. Many people do regular trading and improve their skills but they usually spend a little money. Still, every trader feels he/she join in financial world of big money. He or she is no more an ordinary engineer or a mid-level manager but a Trader. It’s your own business how you treat trading but we recommend regular trading: you can even withhold trading but you should keep your eye on the market and important economic events to accumulate your experience and knowledge about the market. Trading as a profession Lots of traders made trading their major business and income source as soon as they accumulated all the necessary knowledge and experience. We have already mentioned the trader’s work advantages. Many professional traders manage other people’s money having substantial trust funds and receiving the revenue share. Others choose the career of a financial analyst or work in banks and manage hundreds of millions dollars. Thus, working in financial markets can provide a wide range of opportunities. The way to financial market is a wide avenue with the everlasting green traffic lights. The only thing that can hamper you in this way is your laziness or unwillingness to change anything in your life.

Again, why do you trade? Think about it and find the purpose, why? - To live purposefully.