I've been trading stocks and forex all my life. One thing I gradually became aware of during this experience was that the strategies which make the most logical sense typically are the ones which work the best.
Lets face it, you could spend 2 life times trialing all the investment strategies people offer you. There are so many out there and I am sure most of them have some merit. What I have found though (and this in no way passes judgment on the merits of any investment strategy) is that if I really think logically about many of the investment strategies which have come my way, there are often holes in them... big ones at that too.
Strategies generally make sense. The problem I am talking about is not about making sense, it concerns completeness. When these strategies do not cover all possible scenarios, you can be left in a position where you need to make decisions that are not following the strategy. The amount of judgment you can bring to such forced decisions depends on how close this situation is to others covered by the strategy. In a worse case scenario, it could be a complete guess.
Personally I think that making decisions like this, decisions which are outside the logic of an investment or trading strategy, is gambling. Its not a good situation. Sure you may make money with this gamble, but you could lose it too. Its no different than blackjack. A robust and complete trading strategy should take these gambles away from you. There should be no guesses. You should just plan the trade and then trade the plan.
Also, the point about trialing a strategy is that you are finding out whether it will make consistent returns over the fullness of time. The point about trading a strategy is that you know it makes consistent returns over the fullness of time. If you have had a guess mid way through the strategy, you cannot be confident its the strategy or your guess which is making the money. You will need to start again.
So if someone presents you a trading strategy, go through the logic with a fine tooth comb. See if you can come up with scenarios which may happen in real life, which the strategy deos not cover. If you can think of some, try to get answers for these scenarios before you start trading with real money. Because believe me, if such scenarios exist, as soon as you put money down they will come up. I think 2007 - 2009 taught us all that.
And once you are happy with the logical analysis you have applied, don't forget to dummy trade for a while too. In dummy trading you will probably find a number of scenarios you never thought of. This gives you the chance of ensuring the strategy deals appropriately with them too, without risking any money. Good luck.
Lets face it, you could spend 2 life times trialing all the investment strategies people offer you. There are so many out there and I am sure most of them have some merit. What I have found though (and this in no way passes judgment on the merits of any investment strategy) is that if I really think logically about many of the investment strategies which have come my way, there are often holes in them... big ones at that too.
Strategies generally make sense. The problem I am talking about is not about making sense, it concerns completeness. When these strategies do not cover all possible scenarios, you can be left in a position where you need to make decisions that are not following the strategy. The amount of judgment you can bring to such forced decisions depends on how close this situation is to others covered by the strategy. In a worse case scenario, it could be a complete guess.
Personally I think that making decisions like this, decisions which are outside the logic of an investment or trading strategy, is gambling. Its not a good situation. Sure you may make money with this gamble, but you could lose it too. Its no different than blackjack. A robust and complete trading strategy should take these gambles away from you. There should be no guesses. You should just plan the trade and then trade the plan.
Also, the point about trialing a strategy is that you are finding out whether it will make consistent returns over the fullness of time. The point about trading a strategy is that you know it makes consistent returns over the fullness of time. If you have had a guess mid way through the strategy, you cannot be confident its the strategy or your guess which is making the money. You will need to start again.
So if someone presents you a trading strategy, go through the logic with a fine tooth comb. See if you can come up with scenarios which may happen in real life, which the strategy deos not cover. If you can think of some, try to get answers for these scenarios before you start trading with real money. Because believe me, if such scenarios exist, as soon as you put money down they will come up. I think 2007 - 2009 taught us all that.
And once you are happy with the logical analysis you have applied, don't forget to dummy trade for a while too. In dummy trading you will probably find a number of scenarios you never thought of. This gives you the chance of ensuring the strategy deals appropriately with them too, without risking any money. Good luck.
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