Stock Trading Systems

I personally started trading the stock market when I was 13 years old. Of course, it was only on paper. Who would let a young teenager play the market with real money? Twenty years later, I trained and was a licensed New York Stock Exchange broker for real. Let me share with you what I have learned about stock trading systems.

Everybody who studies the market closely will eventually think that they have found the secret of all stock trading systems. That includes beginners as well as the pros. However, when you say the phrase “stock trading systems” the immediate thought is that you are talking about some way to forecast the future. That is true, but only partially.

Forecasting trading systems try to predict what will happen tomorrow based on what happened yesterday. For example, for two decades, if the AFL won the Superbowl, the market ended lower for the year. If the NFL won, the market went up. Had you followed that as the best of all trading systems, you would have made money. Other stock trading systems that are created to forecast, rely on phases of the moon, even the weather.

Did you know that when the weather is bright and sunny in New York City, the stock market rises more often on those kinds of days than when the weather is cloudy and rainy? That is a fact that you can take to the bank. Nevertheless, is this idea of forecasting the market really one of the stock trading systems that we should be interested?

My experience tells me that when we look for trading systems, we ought to be looking for a way to profit after we are in the market and worry less about forecasting the direction of the market. Never are any of the stock trading systems that try to forecast the market, right 100% of the time. However, what if I told you that you could make money in the stock market even if you are wrong about the direction of the market most of the time? Now that would be one of the stock trading systems worth knowing.

Suppose you were able to devise two systems; one for when the market was going up and another for when the market was going down. Meaning when you made money, you made a lot and when you lost money, you lost a little. That would be the mother of all trading systems that you could find.

When you look at the computerized trading programs that tell you they have a variety of stock trading systems that they are using, always question if the program gives sound advice to keep from losing when the stock market goes down. The same approach should also be taken with human stock market advisers who tell you about their stock trading systems.