Our next 2 episodes are geared towards helping you understand the nuances of what goes into a trading system and how to approach understanding different types of trading strategies!
What Is A Trading System?
A trading strategy is the application of making money trading. Despite the different types of traders & strategies, there are several aspects that remain a constant amongst all traders:
- Trade selection & market selection
- Position sizing & money management
- Probability analysis
- Risk management & trade management
- The need for a trading plan
Part 1: Discretionary Trading vs Automated Trading
Traders have options towards defining how they approach the markets. Some prefer active involvement and others rely on less human interaction by way of computer application.
The 3 Main Categories of Strategies:
1. Discretionary (subjective/hands on)
- Aligns information, price & indicators to form a decision to buy/sell.
- You are 100% the one in control of the strategy.
2. Automated (pre-built/hands off)
- Create computer rules based parameters to trade robotically.
- You are not in control once it is turned on.
- Your only control is to turn it on/off.
3. Rules based combination (subjective/pre-built/hands on)
- Combines discretionary decision making using pre-built rules based parameters.
- Allows for human intuition with rules base structure.
- Preferred style.