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Serious Complaints About Day Trading Systems And What To Do About It [Valid RSS feed]

By : William Borden 99 or more times read

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© William Borden, - submitted 2009-06-15 09:43:43

There are many excellent trading systems available, but traders and investors have complaints about all of them. Why is that and what are the complaints?
Common Complaints About Trading Systems

The market makes a big move but no signal was given
Some signals are not profitable
System gives exit signals too early
System gives exit signals too late
System loses money over time
Too many consecutive losses
System only works on some days
Signals are sometimes unclear
System is too complicated
Not enough signals
Too many signals
Large draw downs

Reasons Why All Trading Systems Get Complaints
Some trading systems are flawed. If you follow these systems you will lose money over time. But many systems that are available for sale today are very good. In spite of this investors complain when they fail to make money or when they lose money. Does that mean that all trading systems don't work? No. There are many successful traders in the world using very simple but robust trading systems. Many of these profitable systems are being sold today. Yet some traders will not be successful using using even the best trading systems on the market.
Take two traders for example. Both are using the same system. At the end of the day one trader makes a lot of money. The other trader loses money. Can we blame the system if some people are making money with it?
Here's Why Stock Traders Fail Even With Good Systems

The trader does not understand how to use the system
Lack of discipline to follow the rules of the system
A string of consecutive losses shakes the confidence of the trader

Every day stock market prices move differently. Some days the market is in a strong trend. Other days the market is in weak trend or no trend at all. Some days price fluctuates wildly for no logical reason. Other days the direction of the market is more obvious. That's why trading systems work better on some days and not on other days. Unfortunately one has no way of knowing how a trading day will turn out until it's over.
A good trading system may not be profitable every day, but over time, your account balance should increase. If you're not making money with your system, it could have a 'negative expectancy', meaning that the more you trade it, the more money you will lose. Or it could be that there's nothing wrong with your system. It could be that for one reason or another you're not following your system as consistently as you think you are.
Trading Systems Fail Because Traders Have Unreasonable Expectations

New traders expect to make much more money than is possible
They expect to be right 80% of the time
Traders don't expect a long string of consecutive losses

Here's What Traders Do When Their New Trading System Isn't Working As The Expect

They abandon the system
They 'optimize' their system
They buy another system

Experienced And Successful Traders Never Complain About Their Trading Systems. Here's Why.

They have reasonable expectations
They understand that draw downs and consecutive losses occur with all trading systems
They have confidence in their system
They have the discipline to follow their system consistently
They have experience using a variety of systems

What To Do If You Have Complaints About Your Trading System

Talk with other traders who are successful with the same system
Understand the strengths and weaknesses of your trading system
Adjust your profit expectations
Specialize in trading the most profitable signals your system gives
Never take unclear trading signals
Never change a proven trading system. Be consistent every day.
Trade in simulation or paper trader
Try a different system and see if it's more profitable for you
Trade more than one system
Find a mentor

As a new trader it's impossible to know for sure if your system is at fault or if you're not using the system correctly. Some traders have been trading for years and still are not profitable. The best thing you can do is learn what works and what doesn't from a successful trader.
In the meantime, do not risk real money. Paper trade or use a simulator until you've found a trading system that you're comfortable with.

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