Trader Profile: Trading Systems

Let's get this out of the way. There is no perfect system. No one size fits all. It's similar to the analogy of the education system as seen in the image. For further info on that do some searching on the web about the fish climbing up the tree analogy.

In layman's terms, it just means that a breakout trader's strategies should be different from an investor or a bottom fisher's strategies. When I say strategy, I mean the buy/sell points, holding period etc. The reason for choosing a system depends on multiple factors and you have to be aware of these factors before entering a trade. Here are a couple of things to consider:

Space & Time:

This refers to how much time you can spend looking at the market. Are you a full-time trader? Can you monitor during the whole day? If you have to work a day job then it would be more dangerous for you to buy very volatile stocks. Stocks that could swing from +/- 10-15% in a day. Can you take that risk?  

Another aspect of time is how long is your holding period? If you see 3-7% gain in your stock do you sell immediately to lock in your profits? Or can you still hold it in case it goes even higher in the coming weeks/months?

Risk Profile: 

This refers to how the way your brain is hardwired. When you see a stock going down do you see it as a buying opportunity or do you avoid it? There are players who are bottom feeders and are happy with a stock going down because they think that it is just retracing and they can get it for cheap or low risk.

The other side of the coin are the momentum players who would only ride stocks that are on the way up. Buy high, sell higher is their motto. 

One more aspect of your risk profile is how much are you able to put in one stock? Do you go all in (something I covered before) or place only 25% of your port in one trade? For those just starting and still finding their system or personality as a trader, I would suggest to place 10% or less in a trade. Just to have some skin in the game. 

Find your system

Going back to the earlier analogy, there is no one size fits all system. You have to stop and reflect on who you are as a person and a trader then make your system fit you. Don't compare yourself to how big someone else's gains are. You don't know their journey and how long it took them to get there. Focus on your own journey and one day you might be the one that others are looking up to. 

Bonus note: 

Just don't try to invert your charts. That is most definitely not a system. It's just pure and utter crazy talk. If it wasn't, then you should be able to see it in all respectable charting software out there.