The Strategy Trader
A strategy trader trades a strategy—a method of trading that uses objective entry
and exit criteria that have been validated by historical testing on quantifiable data. Strategy traders are restricted by a set of rules. These rules make up what is
known as the strategy. As a strategy trader, you will not deviate from your
strategy’s rules at all, unless you have decided to use a different strategy
altogether. When your strategy tells you to buy, you buy. When your strategy tells
you to sell, you sell. And you buy or sell exactly how much your strategy tells you
to. You read
The Wall Street Journal
and talk over the markets with your broker, but
you don’t make trading decisions to override your strategy because of something
you read or heard from your broker.
The reason you are restricted by your rules is that your rules are sound. As a
strategy trader, you've spent a lot of time and research in creating those rules.
Your rules have been hand-designed by you and tested and re-tested on years of
historical data. This testing has given you positive results and the conviction that
lets you know it’s time to take your strategy into the future. Your emotions might
still fly as high and low as the market, but at least they are not causing you to
make bad trading decisions.
Our strategy trader has now left behind the gurus, the hotlines, and the broker
recommendations, and has stopped trying to predict which wave the market is in
and how far it will go. He has purchased and learned how to use TradeStation. He
is becoming knowledgeable about computers, data and technology. He has
realized the value of quantifiable data and back testing, and starts to put on trades with the confidence that comes with knowing the historical track record of the same strategy for the last 10 years. He is slowly learning the business of trading.