Why systems aren't the only importance in trading

I stumbled across an interesting tweet this morning that came from Assad Tannous, the founder of Asenna Capital and much revered trader within the trading community having accumulated a wealth of experience through personal encounters in financial markets and offering pearl's of wisdom he learnt from his time as a novice most of which aspiring traders face frequently.

Today's lesson came from a common fallacy accepted by new traders that leans towards placing a considerable amount of priority on developing a trading system while neglecting to recognize the importance of the other remaining aspects involved in trading that all play an important part in ensuring long term success.

I couldn't agree more with the statement as I can often recall going on a frantic search in finding the "Holy Grail" of systems that would generate me returns every time I decided to participate in markets only to be disappointed by the living with dogmatic results on most occasions.  

If trading is..
15% system,
15% risk management,
70% psychology,
Why do most traders spend 99% of their time working on developing systems.

— Assad Tannous (@AsennaWealth) November 14, 2016

But here's the thing, our expectation on markets to perform consistently and profitably over time can be no further from the truth and because we take up these unrealistic presumptions we constantly find ourselves falling into the trap of either tinkering with the existing system by making it more complicated or heading on a renewed mission to find a new one that coincides with current conditions that simply goes "broke" after the market changes appearance.  

And while trading systems form an integral part of the entire trading process, being able to acknowledge it's effectiveness under certain pressures when active holds a greater value to your success as a trader than mindlessly executing a system that can't cope 3/4 of the time.

A trading system provides the structural characteristics of a trade with the goal of promoting organisational flow which allows you to observe your trade performance in an analytical manner, helping you to easily identify areas of improvement.

Risk management should remain in place at all times as an acknowledgement on the part of the trader recognising the markets ability to transition from a favourable environment into a climate that becomes indifferent to rules, reason and return in quick succession.

Finally, psychology is needed to help the trader better cope with these transitional periods, requiring the bulk of a trader's energies in understanding that probably the greatest source of emotional instability is produced from that which we are not in control of.

Processing emotions properly assists the trader in freeing up the pressures of having the feeling of restlessness interrupt the normal course of placing a trade which becomes distorted in not realising the control over the system and risk management.  

Have markets become difficult to trade?

There’s a seemingly stale mood hanging around financial markets since Wednesday after the unexpected election of Donald Trump as the president-elect of the United States of America that caught most off guard and added yet another degree of complexity to an already complicated economic outlook.

Having avoided the event by sitting on the sidelines due to the volatile nature often associated with major political and economic outcomes, I’ve found my trading activity continues to be intimidated by the fear of uncertainty that’s extending it’s presence over financial markets as participants attempt to understand the good(or bad) fortunes that may be brought into the future.

Since the occurrence of the divisive “Brexit” vote which was held on the 23rd June 2016, markets around the world have had the shine with which they once offered handsome returns from, abruptly taken away as ordinary citizens send a stern message to politicians that complacency that’s wrought significant policy decisions will no longer being tolerated.

The first indications of a poor trading environment happened when markets found stability sometime during August when a handful of opportunities exhibited themselves with all the hallmarks of a high probability setup.

From this analysis I decided to seek out setups that possessed the highest possible chance of succeeding which was influenced by the lack of direction and poor performance of markets during the year. My thought process stemmed from the idea that by selectively choosing the best setups to trade might aid my efforts to a decent return that had escaped me this year.

But the failure of every single trade I put on whilst spending a considerable amount of time finding them was enough for me to conclude that the difficulty in picking the right trade was substantially higher than it had been in prior years and thus necessary for me to taper off my trading activity until some traction in either a upward or downward trend can be found.

In saying this my strategy will be paying close attention to multi-year highs and lows of major world indices so as to gauge direction, most particularly when price nears them with a focus on a convincing break up or down as this could possibly indicate a break out of the motionless sideway range but more importantly a shift towards trendiness.

The absence of trendiness as a feature in markets has meant most traders have found it hard to churn out a profit in the last year let alone the last month. The fact that it’s occurred more frequently in recent times does suggest many may have taken the hint and opted to watch proceedings without taking part and in essences saving themselves from ruining their account.

If I’m going to be confident in the markets ability to find a direction, I’ll need to see a strong indication that exposure is being taken up and participation flowing freely again. Until then I’m treading cautiously and patiently in the hope that the uncertainty clears up and we’re able to see conviction in the movements of markets.

How to Take Trades Using Price Action~ Forex4Noobs

In the month of October I will be taking leave from my usual blogging activities to concentrate on furthering my studies. I will be posting up various video's I found on Youtube from Trading Vloggers discussing the different parts of trading and how to overcome some of the obstacles you find along the way. I hope you enjoy them as much as I did and it provides you with key insights to take your trading forward.

Forex 4 Noobs teaches new traders how to utilise price action candle's to trade successfully. 

To find out more about this vlogger go to www.forex4noobs.com

How to Draw Support & Resistance~ Nial Fuller

In the month of October I will be taking leave from my usual blogging activities to concentrate on furthering my studies. I will be posting up various video's I found on Youtube from Trading Vloggers discussing the different parts of trading and how to overcome some of the obstacles you find along the way. I hope you enjoy them as much as I did and it provides you with key insights to take your trading forward.

When I first became familiar with the term price action in trading Nial's video's were of great assistance to me in understanding the movement of the market when using this form of trading strategy. He has a number of different videos detailing various setups using price action which is highly recommended for all traders. 

You can find out more about Nial Fuller by going to www.learntotradethemarkets.com or if you'd like to watch some of his educational videos follow the link to his Youtube Channel Nial Fuller 

Day Trading Strategies for Beginners: Warrior Trading

In the month of October I will be taking leave from my usual blogging activities to concentrate on furthering my studies. I will be posting up various video's I found on Youtube from Trading Vloggers discussing the different parts of trading and how to overcome some of the obstacles you find along the way. I hope you enjoy them as much as I did and it provides you with key insights to take your trading forward.  

To find out more about Warrior Trading follow the link 

The 4 Types of Reversals and How to Trade Them~Tradciety

In the month of October I will be taking leave from my usual blogging activities to concentrate on furthering my studies. I will be posting up various video's I found on Youtube from Trading Vloggers discussing the different parts of trading and how to overcome some of the obstacles you find along the way. I hope you enjoy them as much as I did and it provides you with key insights to take your trading forward.

Rolf and Moritz are the travelling traders behind Tradeciety, an educational website that provides content relating to most of the important aspect involved in the trading process. They one of the few active trading bloggers on the net whilst journeying to exotic locations around the world. I've found their trading lessons very useful and would recommend their website to all experience of traders whether you be a professional looking to brush up on your knowledge or simply a beginner who's looking for great tips on how to grow your expertise.  

You can find both on Twitter under the following handles:

@Tradeciety - Rolf

@tradecietymc -Moritz