How to Choose the Best System for Your Trading

Finding a trading system that actually works is like trying to find a needle in a hay stack. It can be time consuming, costly and difficult, so is it worth it to put in the time and money? Let's look under a microscope to help answer this question and offer some "how to" tips for investing in the right system which you will use for your trading.

How Valuable is Your Time

"Putting in the time" is crucial for any worthwhile venture and finding the system that will work for you is no different. Using a strategy of preparation, you can dedicate a certain amount of time each day to research different trading systems and methods that may or may not work for you. By allocating your time appropriately it will not seem like you are flying blind, nor wasting your day with massive google searches. Choose the slowest part of your day and stick to it so your other responsibilities are not being affected.

What is the Cost

Of course the price tag is almost always the most important factor in making a purchase. It is not wise to pay too much, however it may be worse to pay too little. Prices range drastically in the trading industry for systems from $200 - $20,000; while $20k may be excessive you must weigh the outcome potential with a longer term perspective. Is there potential to make that amount back in a reasonable amount of time that will not hurt your well being? Does the amount you are spending leave enough capital to trade and actually make money? If the capital tradable doesn't line up with your time horizon it is best to look for a more suitable solution. Trading with a system is not a get rich quick scheme so paying $200 will likely lose that and much more in a short period of time. Choose a feasible amount that will allow you to not break the bank and sustain enough capital to trade. A realistic cost for most will fall into the $2,000 - $8,000 range.

Is it Automated

Keep in mind you may not be looking for a complete "black box" solution, however you should be able to remove 100% subjectivity. You may always add discretion to your trades if you feel it necessary, but it should be an option and not required. It is highly encouraged to get the proper training on the financial markets before attempting to use a trading system of any kind. Once you have the training you will be able to further assess how the system will perform in a plethora of market conditions. Automation offers many benefits including push button testing, optimizing and reduced time in front of the computer screen. After deciding on the system you will trade, allocate your time previously used for research on the testing and optimizing. Since you're investing your money wisely, complete automation capabilities will help you invest your time wisely.

Market Conditions

Each day the movement of price is ever changing. Volume will increase and decrease along with the volatility. A good trading system should work in multiple market conditions. If it is contingent on a trending market, you will lose out on many profitable opportunities and more importantly lose the profit you've already made.

Multiple Markets

Do not look for an “emini trading system”, look for the ability to trade multiple markets and time frames. The more limitations involved the less option you have for success. Create a portfolio across multiple asset classes such as stocks, futures and forex; test them and choose which are successful. This will give more opportunity to reap the rewards.

Features Included

You will want the ability to track and profile the profit potential across both historical and future results. Do not rely on back-testing alone because what happened in the past may be very different than the future. Each trade should be documented and displayed with multiple visual aspects such as profit and loss graphs. Break the graphs down by year, month, week, day and even time of day. This will give you a better idea of what works and what is less profitable.

Risk Management

Is there impressive risk management that will give you multiple ways to reach your financial goals? Managing your risk in each trade will help create longevity and consistent growth. Look for the option to reduce your risk and lock in profit as it is offered, otherwise known as a trailing stop. Without the ability to manage the risks involved in trading, a system could lose more than your initial investment.

In Conclusion

Trading systems are a great way to supplement your income and even become a full time solution if the above criteria are included. Look for great risk management, complete automation capabilities and a plethora of features to help you get a complete understanding of the best trade times to help you reach your financial goals. Finally, never spend more than you have hoping for a quick return on your investment. Just like any other transaction, returns take time to accrue so have a realistic view on what to expect.