Achieve Your Trading Goals
"The pros are good at identifying systems
that meet their personal trading goals."
Professional traders are only interested in systems that are capable of meeting their personal trading goals for reward and risk.
These trading goals are the foundation on which any system must be built. Their presence has a major influence on performance and greatly increases the chances that results will be acceptable.
Once established, the trader's goals will not vary unless he changes his attitude to risk - which is not very likely.
When evaluating any set of system rules, the professional trader uses a methodical process that starts by establishing the risk resonance of the system.
Knowing the risk resonance is the key to keeping the limit of risk within bounds, controlling drawdown and preventing overtrading.
The remaining parts of the evaluation process are primarily concerned with generating satisfactory return - and involve a number of procedures such as setting parameter values, installing protective stops and any other characteristics the trader wishes his system to have.
Last but not least, the system is further tuned towards improving the return/risk ratio.
The trader's detailed tests reveal if the system is likely to be acceptable – but there is no guarantee that this will prove to be the case.
That is not a problem because there are plenty of other system rules around and it is not too difficult for most traders to create their own if they wish to.
Sometimes what at first appears to be an unacceptable system can be redeemed by adjusting the rules in some way - otherwise rejection is the only alternative.
The pros are not only good at identifying systems that meet their personal goals - they insist that their systems must show they are capable of achieving them.
Copyright David Bromley 2006
All Rights Reserved.