Saturday, 5 September 2015

Do You Know the Difference Between Trading Methods, Systems, and Plans?

By Steve Burns

There are significant differences between trading methods, trading systems, and trading plans. These variations can be confusing for new traders, but it is important that students of the market understand and develop these areas in order to optimize their chance of success.

Trading Method
A trading method is the overall process and trading style that is used to profit from the markets. A trading method can be defined as principles used to successfully trade in the stock market, options, forex, futures, or bonds. These operating principles are based on the belief of long term profitability and increased value of trading capital. Traders using different systems and different plans can use the same methodology. Methodology is based on the specific style of trading, with some examples being:
  • Technical Analysis
  • Trend Following
  • Value Investing
  • Momentum Trading
  • Growth Investing
  • Swing Trading
Trading System
A trading system is a set of rules that quantifies buy and sell signals, as demonstrated by successful testing on price history or chart studies. A trading system is the specific kind of data or knowledge used to execute the trading method, based on price action or fundamental valuations. These signals are triggered by measurable technical indicators or key levels on charts. Trading systems have specific parameters relating to position sizing that manage risk and increase the probability of profitability over time. A trading system has at least eight quantifiable elements:
  1. Entry signal
  2. Exit signal
  3. Winning percentage
  4. Risk to reward ratio
  5. Position sizing parameters
  6. Frequency of trading opportunities
  7. Average expected annual return
  8. Maximum expected drawdown
Trading Plan
A trading plan is a set of rules, consistent with a trader’s chosen methodology and system that govern how trades will be executed in real-time. These rules determine what will happen based on the trading system’s entries and exits, risk management, and psychology. The trading plan is meant to keep the trader disciplined and safe from their own weaknesses, while providing the parameters for consistent profitability.
Understanding the difference between methodology, system, and plan is essential to organizing and implementing trades at the right levels. As traders turn research into beliefs, trading methods will become their religion, trading systems will become their bible, and their trading plan will allow them to walk in faith every day.

25 Simple Things to Give Up If You Want to Succeed

Everyone is entitled to success; we just have to make room for it. Learn to give up what is keeping you stuck and start moving closer to the things you want out of life.

By Lolly Daskal

The best way to invite good new things into your life is to make room for them. Just as you declutter your office and home, from time to time do a check and throw out anything that isn't helping you make your success achievable.

Here are some good places to start.

1. Trying to be perfect.

Perfectionism sets us up for failure. It's not a quest for the best but a way of telling yourself you'll never be good enough.

2. Playing small.

Expand your horizons. Go big. Grow! Sometimes the process is painful, but it's worth it.

3. Faking it.

Vulnerability sounds like truth and feels like courage. Truth and courage aren't always comfortable, but they're always strong.

4. Waiting for luck.

Luck builds its foundation on preparation. Coming across good opportunities may be partly a matter of luck, but it's also a matter of knowing where to find them and being prepared to make the most of them.

5. Waiting for anything.

We have been fooled into thinking that if we wait for the right time, right place, and right person we will be successful, but opportunity is where you find it, not where it finds you.

6. Needing approval.

Don't let the opinions of others consume you. What a waste of time!

7. Trying to do it alone.

Even if you can pull it off, it's twice as much work and half as much fun when you do it alone.

8. Making empty promises.

Make your promises rare and 100 percent reliable.

9. Fixating on your weaknesses.

We all have our weak points. Work on them, but focus on your strengths.

10. Blaming others.

It's cowardly and it costs you respect.

11. Overlooking your negative thoughts.

You may believe that you are responsible for what you do but not for what you think. The truth is those things can't be separated.

12. Living in the past.

Your future starts now.

13. Trying to please everyone.

The surest path to failure is trying to please everyone. Work to please only yourself and those who are important to you.

14. Small goals.

Small goals yield small results; big goals, big (and sometimes huge) results.

15. Holding on to grudges.

They're a waste of time and a thief of contentment and happiness.

16. Avoiding change.

Change will happen with your permission or not. Manage it when you can and always make the best of it.

17. Trying to never make a mistake.

Avoiding risk and never daring is the biggest mistake you can make.

18. Saying "I can't."

Don't give up just because things are hard, and don't talk to yourself in negative terms.

19. Minimizing yourself.

Being a shrinking violet doesn't help you, it doesn't put anyone else at ease, and it's a bore.

20. Gossiping.

Small people indulge in gossip. Talk about ideas instead--and when you do talk about people, be compassionate and supportive always.

21. Staying down.

Failure does not come from falling down. Failure comes from not getting up.

22. Complaining.

If you spend time complaining about yesterday, you won't have time to make tomorrow better.

23. Spending time with negative people.

If those around you are trying to bring you down, maybe it's time to lift yourself up.

24. Comparing yourself with others.

Comparison is another thief of your happiness. Don't worry about what others are doing.

25. Thinking you can't make a difference.

Each of us can make a difference--and together we make a change.

We all have traits and tendencies we need to give up so we can let something great come in. Everyone is entitled for success; we just have to make room for it. Learn to give up what is keeping you stuck and start moving closer to the things you want out of life.

Quote for the day

“The truth of things is the chief nutriment of superior intellects. ” - Leonardo da Vinci