The Benefits of Strategy Trading
I believe that a trading strategy, which has been properly developed and tested,
can make you more money than trading any other way. However, this is not the
only reason that strategy trading is the method of choice for most successful
traders. There are other benefits as well. One of the most important benefits is
that you can sleep well at night knowing that you’re trading a strategy that has
been tested and re-tested, and is proven to be successful. No matter what happens
in the market during the day, the confidence you have in your strategy makes this
type of trading easier on you.
Another advantage is that you can choose a market and a trading strategy that
compliments your personality. The basic idea is that the trading strategy you select
is based on the type of market action you are the most comfortable trading.
Those who desire to always be in the market will select a different strategy than
people who prefer short-term positions. If you get a thrill out of riding the big
trends, then you will select a different type of strategy than someone who enjoys
going against the trend.
Have you ever received an unexpected call like this, “Hi, Joe. This is Stan, your
broker. We need to settle the margin on your account. Looks like the market
really went against you this week”?
If you are a strategy trader, this is not likely to occur. Strategy traders always know
where they stand financially. They know this from the financial results of the
historical tests. If you do get a call like this, you will most likely be expecting it and will have planned for it. You have creatively designed a strategy based on the amount of money you have to work with. As a part of knowing the maximum
equity drawdown associated with your strategy, you can determine the strategy’s
capital requirements and make adequate provisions to provide enough capital to
maneuver through the eventual drawdown. There will be no financial surprises.
I’ve been talking at length about why strategy trading is the most viable way to
make money in the markets and what type of skills and knowledge are necessary
to be a successful strategy trader. I showed you a study that in my view gives very
solid proof that strategy trading (objective decision making) is the most successful
way to make decisions. If there was ever any doubt in my mind, this study cleared
it up. I hope you are now convinced that if you want to make money you should
be a strategy trader.