Methodology trumps the market | stockbee

1/22/2008

Methodology trumps the market

There is lot of blame game going around today. It is human tendency to blame others and government and policy makers for the market action. But that view misses the crux of trading. As I have said before the most important starting point for successful trading is methodology and methodology trumps markets.
Market is ever changing. Market is not predictable. Market is complex. Market offers too many choices. Market is not controllable. But methods are controllable. Methods can be constant irrespective of the market situations. Methods are under traders control. Your trading mix is completely controllable and that is the key to profitability.
If you have a well defined market direction determining system, you would not be long in this market or would have had some downside protection. Putting together such system well in advance and thinking through all elements of trading ahead of time is what methodology like Market Monitor is all about.
Staying in the game is extremely critical in the speculation game. If you stay in the game you can convert your small stakes in to millions.

2 comments:

Bill aka NO DooDahs! said...

Good re-affirmation.

I've been asked a few times what I thought about the market direction in the last couple of weeks, and I've had an opinion, but I've just about always presaged it by:

(1) describing what my systems were doing;
(2) stating which system I was trading with my own money; and
(3) stating that I was going to follow the system.

The people that wipe out either have no documented system (i.e. a "system" based on discretionary emotional response), poor risk control, or both.

Seykota said it best, people get what they want from the markets, and the best measurement of your intention is your results.

Hector Rivera said...

Kind of weird, Fed cut the interest rates, however, all the indicators including the Summation index, actually went DOWN, including stocks above the 20 moving average, dropped 1 %...