Monthly Archives: January 2009

A Great Beginners Trading Strategy

I received a great email about a week ago from a subscriber (let’s call him TF), asking my thoughts on the trading of systems. TF had viewed a number of webinars advertising various trading systems and was particularly interested in two. The first company trades a simple chart pattern combined with a proprietary indicator overlay on emini futures. They also offer ongoing trading room support (at a significant cost). The second is based on proprietary software and appears to be suitable for any market.

The cost of both seems to be dependent on the options chosen. Certainly, with addition of ongoing trading room subscription, the cost is in the many thousands.

Unlike most people investigating these types of systems, TF is actually approaching them with a very realistic attitude and mindset. He is not expecting some Holy Grail means of achieving profitability through no effort. Instead, sees them as an opportunity to ‘get his feet wet’ and learn within a live-market environment – a very refreshing attitude.

Some extracts from his email:

“On several forums, I have read that trading systems are not effective. I am wondering if you have an opinion on that. Also from the standpoint of "getting your feet wet" by actually trading, why wouldn't a simple system with instruction (as most systems provide help desks along with live trading webinars each week), while not committing a lot of money, provide a learning environment? I realize one may not make a fortune, but that would not be the point. The point would be getting a feel for trading.”

And later…

“I am aware that most of these systems are not "flexible" in the sense they do not perform as well in some market conditions as others.

The only reason I bring this up is because at this stage of my education, I don't feel I could outperform a canned system, and I'm just wondering if you see this approach making sense.”

The following is part of my response…



Stops – Frustrating!

Here’s a great question from one of the subscribers. I thought it would be good to share this one as there are some great lessons here:



Hi Lance:

I’m really lost on this issue of stops….. I know you have a very different viewpoint on it – I’ve seen your video on the site.

However, placing stops or not is one of the most frustrating and perplexing issues. Just this month a simple instance – last week I exited my position in oil related stocks / etf’s at a sizeable loss (as it was made out to be as though oil is going to sell as cheap as water!!!!) only to see this week the trend reversing and futures going beyond 41 today…… not only erasing my losses but giving me a good profit had I held on to those positions. There’s nothing more frustrating to see you book losses and then it go the other way round and yield  a profit had you held on to them.

Is there a way to fix this issue or does everyone go through it?