Friday, May 24, 2013

What Is The Best Trading Strategy?

I have read many forum threads and quite a few books, and as a result am exposed to many different styles of trading. However one thing I can never understand is people disagreeing with each other. I simply don't get it! First of all let me just list out some styles of trading:
  1. Wyckoff/VSA
  2. James16 PA Trading
  3. Bob Volman (Tick chart scalping. 10 pips stop, 10 pips take profit)
  4. Supply/Demand Trading (Sam Seiden, ReadTheMarket, Price Is Everything FF Thread, AceGazette)
  5. Order book/Level II Trading
Of course there are thousands more. Fundamentalists, quants, arbitragers, spreaders, SonicR, MA systems etc etc. Here are two main points I want to make. 

First of all, even if one has found a profitable system, why on earth does he have to think that all other systems don't work?! Personally I have a very simple way of evaluating a system. Are the traders using it making money? If so how much? Btw when I say how much I'm referring to a time based return in terms of equity %. I find it silly when a trader boasts of making 1000 pips in one month. Heck he could be risking 2000 pips to make that 1000 pips and if his R is 2%, that is only a meager 1% increment on his equity. Back to my point, I love the quote "A man with experience is never at the mercy of a man with an argument." One can try his best to explain how awesome his system is but if his trading results does not reflect it, why listen to him? Should a PA trader scoff at a Wyckoff trader with remarks like "Har vol on spot Forex is only tick volume and is not accurate!"? No, because there are spot FX Wyckoff traders who are doing very well. Just because a PA trader doesn't know how to trade Wyckoff properly doesn't mean it doesn't work! Just because a trend trader doesn't know how to catch tops/bottoms doesn't mean a supply/demand trader cannot! And to take it further... Don't tell me that trading Forex is very risky when you haven't even heard of position sizing and all you've been doing is buying and holding equities for dividends! So... my quest is to continually seek out ways to improve upon my current knowledge/system, always demoing and proving to myself before implementing. And the sources I seek must be reliable with people who dare to post without hindsight and who are incredibly profitable.

Secondly, I am a strong believer that the best system is one that suits your personality. An impatient person trying to trend trade higher time frames simply won't find success with it. So just because you really believe in your system and feel comfortable with it doesn't mean it is the best system in the world. I've found that traders often scorn a system because they've tried and failed to find success with it. This could be because they haven't put in enough effort to really get good at it, or it could be because the system doesn't suit them. I really don't understand why such traders are so blind/ignorant to think that the system that works for them is the best in the world. And mind you these could be really good traders. I wish there was less pride and more open mindedness in the trading world.

I really like what one of my mentors told me: "Anything you believe you must prove. Once you prove it you'll never question it" And so my endless quest of demoing and proving continues... I really look forward to the day when I can find consistent success and immense profitability. When that day comes and anyone tries to argue with me and promote his holy grail system, I'll just say "Hey I'm growing my account at 30% monthly, how about you"? That should put any argument to rest pretty quickly, and in the event that he does make more than me... hey I've found a new source ;)

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