Some interesting observations . . .

“No doubt, I like the idea of sharing trading ideas and concepts. But, to share an entire trading system (if it truly is a full blown trading system) is not only unwise, but in most all cases it will be as close to impossible as anything else.

Real trading systems have lots of moving parts. Each of them could be uncomplicated as a simple one line mathematical function that derives a single value. Or, a part of a trading system could be an entire cluster of mathematical functions, algorithms and signal processors – just to make-up one component of an even larger trading system.

Trading Systems, are really not the same as Trading Methods, Trading Tactics and/or Trading Strategies. A system by definition is the integration of several (many) lower-level functions, methods, calculations, inputs, filters, scanners, etc. To describe how one uses just one of those components, could take an entire semester. To layout a full blown trading system, could take years in an online environment such as this.

For that reason, I opt to talk about trading concepts that have made me a consistently profitable trader. To that, I would add several key concepts that I learned from a serious trader about 7 years ago. That person showed me the futility of attempting to trade any market without making certain that my trading system could account for the following concepts:
a) Timing
b) Direction
c) Magnitude
d) Framework
e) Probability

I learned from that individual the importance of trying to account for each of these core elements to successful trading and how ignoring any of them would lead to ultimate de-optimization of my trading system.
When you stop to think about it – each one of these core components go hand-in-hand. I was shown that:
Timing = Maximizing profit
Direction = Minimizing draw-down
Magnitude = Identifying profit potential
Framework = Minimizing psychological draw-down
Probability = Maintaining positive expectancy

Trying to trade without these core components, de-optimizes the entire process of trading in general. To prove it to yourself, simply take the inverse of each one and say it out loud to yourself:
“Minimizing profit”
“Maximizing draw-down”
“Failing to identify profit potential”
“Increasing negative trader psychology”
“Maintaining unreliable and unstable expectancy”

You would not willingly attempt to blend any of those things into your trading routine. Yet, many traders do this all the time without ever realizing it, by failing to properly account for these core elements by their own design.

Thus, whatever the trader can do to ensure that they have accounted for these core elements in their trading habits, routines and systems, is time well spent.”

Well constructed and well said.

dcginc