Trading System
For a long time I really thought I knew what I was doing in the stock market. I had been managing my own portfolio and doing a pretty good job of it. I traded stocks online for at a few hours a day. I didn’t have a particularly well-balanced portfolio, but I still thought I’d be okay. Then the economic crisis hit the US stock market like a meteor and my portfolio was cut in half. I lost all of the gains (and more) that I had made trading over the past four years. Like many people I was nearly hysterical over the situation and I searched for any advice anywhere I could find it. Then I read an article in an investment magazine that talked about the importance of having a trading system.
A trading system is little more than a basic plan or strategy that suits your needs and expectations. The most important think when devising a trading system is to evaluate what level of risk you are willing to take on. Since I was a relatively young man with making working years ahead of me, I concluded that I could accept a fair amount of risk. But, more than anything else, I wanted to create a balanced, diversified portfolio, and my trading system helped me do this.
I decided to do as the article recommend and put 30 % of my money in Stocks 20 % of my money in Bonds, 15 % in commodities, and the rest I kept in cash. When selecting a stock, I only bought equities of companies that I had done my research on. In fact, I watched many of them trade for hours each and day before I decided to purchase them. By the time I finally had these stocks in my portfolio, I had observed their daily movements for so long, I began to see patterns in how they traded. I bought and sold the stocks based on these patterns and before very long I was making money in the stock market again.
Months later I wrote a letter to the editor of the magazine that had published the article about the article about the importance of having a trading system. I let him know that my new portfolio, which I had created with the help of the article, was up over ten percent in just a few months. I also told him that my trading system had given me more confidence and security with regard to the stock market. They published the article in the next issue and I sent a copy to everyone I knew.
