Anyone browsing the internet today would think it’s easier than ever to make money as a trader or investor.
It’s certainly simpler to place trades. You can even do it from your mobile whilst walking the dog. Obviously then you should trade as much as possible, ideally many times a day, to capture every opportunity. The high frequency traders do it, so why not you?
And you’re not limited to stocks and bonds. Exotic fare like futures, options, spread bets, and contracts for difference are readily available. Sure they allow you to take huge, leveraged bets, but that just means more profit – right?
There is also general agreement that what you need is a trading system.
This is actually a good idea. Research has shown that humans are pretty poor at making financial decisions, thanks to parts of our brain we’ve been stuck with since were reptiles. The simple rules of a trading system do much better.
Luckily there is no shortage of many kind people offering to share their trading systems. For $100 you can buy their book, £100 a month gives you access a chat room, and a few thousand will purchase one-to-one coaching. Confusingly all these people claim to have the perfect system. Better buy them all.
You can also develop your own system. There’s help here too. Along with established desktop packages there is now software on the Cloud. These allow you to mine your data, until it reveals a system that would have made serious money in the past. Obviously it will also make serious money in the future.
What if can’t create your own system? No problem. Thanks to social trading you can “follow” someone else’s buys and sells. A given internet guru might have no relevant experience or qualifications, but they’ve made 100% in the last three months, so they must be a genius.
Much of this advice will indeed help you – to lose money. There are several key mistakes which you’d be making: trading too often, taking too much risk, being overly optimistic about profits, data mining, and over complicating your system. Also even if you’re lucky, and find a genuinely good trading system, it might not be one that suits you.
Fortunately real help is at hand. I have written a new book, Systematic Trading: A unique new method for designing trading and investing system, to help you to avoid these errors.
Do I have the necessary experience and qualifications? Well I spent more than seven years working for one of the world’s largest systematic hedge funds. Before I left I was managing a multi-billion dollar fixed income portfolio. Now I trade my own money using a system I developed myself.
In Systematic Trading you’ll learn to decide how fast you should trade, how much risk you should take, and what are realistic returns to expect. I explain how to avoid the lure of data mining, and how to use simple methods to build your system without the dangers of complex software. I’ll also explain why three months is wholly inadequate to judge trading performance, and how much data you really need.
My book doesn’t contain a perfect trading system – I don’t believe such a thing exists – but it does help you to design a system that is right for you. Regardless of your trading style; whether you use a fully systematic system or your own discretion to predict prices; no matter if you’re a short-term trader or long-term investor; amateur or professional – the framework in the book can be adapted to your needs.
Systematic Trading: A unique new method for designing trading and investing systems is published by Harriman House and is available now.