A Systematic Approach to Trading and Investing
With the advent of the high powered personal computer and enhanced software capabilities, system trading has become a viable option for the individual investor, especially those with a desire to take control of their investment portfolios. This “do-it-yourself” segment of the investing public is growing, as evidenced by the dramatic trend toward electronic trading and publications dealing in Alternative Investments. Viable trading strategies start with a consistent approach to the market. Consistency is difficult for many investors because decisions about money can be very emotional. Diversification of assets is an essential part of a balanced investment portfolio. Many investors have difficulty appropriately diversifying across methodologies, markets and time frames on their own. Additionally, money management and/or allocation of funds in a portfolio are crucial in order to balance risk. These three key elements are the primary reason why so many traders are turning to a systematic approach.
A system is a method of trading, using objective entry and exit criteria, based on parameters that can be validated by historical testing on quantifiable data. A system can be as simple as entering a 10 point stop on every new position or as complex as using fractal analysis and Artificial Intelligence to signal trades. In common terms, a system is derived from technical analysis of current and past price action in an attempt to forecast future price direction. Using a computer, these results can be tested through millions of permutations to generate objective trading signals. When a developer’s computerized trading signals are combined with sound money management principles, a “trading system” is created. Investors use these systems to trade the futures and/or securities markets to satisfy their individual desire to control and customize their investment program.
The Potential Benefits of System Trading:
To help traders control and customize investment decisions, systems may:
1. Provide historical risk and return parameters.
2. Control trading by eliminating fear, greed and indecision.
3. Provide consistent and specific trading signals.
4. Preserve capital by applying money management techniques.
5. Customize a portfolio for specific needs with your risk-reward parameters and capitalization.
The Potential Risks of System Trading:
There are some risks associated with systems.
1. Systems may be slow to adapt to changing market conditions.
2. Traders must maintain the discipline to execute every trading signal.
3. Traders must allocate the time and infrastructure to monitor the system.
4. Have the proper capitalization to withstand the potential drawdowns.
5. Hypothetical past performance of any system is not necessarily indicative of futures results.
In conclusion, It is important to find the system that is best for you by taking into consideration your specific capitalization, specific trading properties of the system, and the emotional impact of the trading methodology.
FuturePath Trading can provide the tools you need to assist in the evaluation, monitoring, and execution of 3rd party trading systems, advisory services, and Managed Programs in Futures and Forex. If you are looking to diversify into alternative investments, it is important to do your homework to select the right firm to entrust with your capital. Our professional broker team’s focus is to provide uncompromising service in the pursuit of excellence. The founding principle of FuturePath Trading is to focus on customer service and support of our traders. Our entire organization is dedicated to providing customers with the very best un-biased service. Please contact us for more information about our firm, and the unique support and service we provide.
For more information Contact FuturePath Trading.