One of the biggest secrets of successful trading is finding a trading system that fits you personally. Developing your own system allows compatibility with your own beliefs, objectives, personality, and edges.
You might be thinking, “why should I develop my own system? Isn’t it easier to just go buy a system with proven results?” When someone else develops a system for you, you don’t know what biases they might have. Most system development software is designed because people want to know the perfect answer to the markets. They want to be able to predict the markets perfectly. You can buy software now for a few hundred dollars that will allow you to overlay numerous studies over past market data. Within a few minutes, you can begin to think that the markets are perfectly predictable—a dangerous belief that will stay with you until you attempt to trade the real market instead of the historically optimized market. Many trading accounts have ended up plummeting because of this very thinking. One “sure-thing” trade placed without proper position sizing can wipe some traders completely out of the game.
And what if the person peddling the system is just a great marketer who makes money from selling systems instead of actual trading? How would you know?
In Van’s experience, very few people have really good systems, and one of his jobs is to teach traders what it takes to develop a complete system for themselves. It isn’t rocket science; it just takes commitment and the right knowledge.
You Don’t Need Computer or Math Skills
The idea that you need computer or math skills to develop your own system is one of the biggest misconceptions out there.
Even if you find computers, math or anything mechanical terrifying, you can still determine how and what you want to trade, which is the basis for developing your own system. In fact, you’re the ONLY person who really knows what will work for you.
The key thing to remember about system development is that the trading strategy is THOUGHT UP by you so that it fits your beliefs, wants, desires and needs. You can hire someone else to computerize your strategy if you can’t do that part yourself; there are plenty of programmers out there who will do it for you. Just remember that not all trading systems even have to be computerized in the first place! In fact, people have designed and tested successful trading systems for years by hand. Computers make things quicker, faster and more efficient, but they aren’t absolutely necessary unless you find that you have to use one in order to feel confident about your trading (if you disagree with this assertion, you probably DO need computer testing to feel comfortable; perhaps you believe that when a computer generates numbers, it is more accurate).
If you truly understand what a trading system really is, this will all make sense. It isn’t complex unless you choose to make it so! A key factor is to set your trading objectives. This is true for both system development and using proper position sizing. Position sizing is what helps you meet your objectives for your trading system. Next, we will clarify what we mean by objectives.