Stock Trading Systems - No System is Still a System

A stock market trading system is essentially a set ofstock markets. Like most things, they range in quality
rules used by a stock trader to cover the wholefrom good to bad, with the good ones being quite
trading process. That is, it identifies which stock toexpensive. If you are heading in this direction, do a
buy, how much to buy, when to buy and when tolot of research before you buy.
sell. A simple system might look like this:There are many professional traders out there who
1. Buy rising stocks in rising industrial groups on aoffer courses to teach you the system they use to
breakout from a 5-day consolidationtrade stocks. These traders are also selling you a
2. Place a sell stop just below the consolidation areastock trading system, their system! While the system
3. Aim to loose only $200 if I am wrongthey are teaching you works for them, you must
4. Move my stop loss up to break even after a gainremember, in many cases it was tailored to their
of 5%lifestyle not yours. You need to be able to adapt
5. Continue to move my stop loss up after everytheir system to match your personality and risk
5% gain until I am stopped outtolerances. With a large variety of systems being
Someone who invests in stocks for the long termtaught, you should be able to identify one that
would have a totally different set of rules as would acomes close to how you think about the markets
day trader. Your rules need to match what you wantand as such may only need to make minor
to accomplish.adjustments to the strategy. In these systems, you
Stock traders generally use one of four stock tradingknow why a specific stock is being recommended for
systems:purchase. If this taught system is well thought out
One of the more common systems people use is nothis can be a valuable learning experience and
system. As strange as it may sound, not having apotentially can start you down the road to being a
system is still a system. Stock traders in thisbetter stock trader.
category just buy on a whim with no real thought asThe final system, which will be discussed, is the self
to why they are buying the stock, no understandingtaught method. In this trading system, you may learn
of the risk profile of their position and no exitabout stock trading from a number of sources such
strategy. They likely react to something that theyas introductory lectures, magazines, books, websites,
heard about in some form of media or from otherTV etc. You would then take this information and
people. They learn essentially nothing from eachover time develop your own trading style by back
transaction and tend to continually repeat theirtesting your ideas, paper trading or cautiously trading
mistakes. If you use the no system approach toan account. By keeping good records of what you
trading you may want to consider finding a moreare doing and by continually upgrading your education,
complete trading system.you will slowly improve your trading skills to the point
Another common approach to trading is using whatwhere you should be a profitable trader.
will be referred to as a black box system. In thisNo matter what system you ultimately use or
case, the trader is using a system, which wasdevelop to trade stocks, it will likely cost you a fair
developed by someone else. Black box systemsbit of time and money. Whether you spend your
generate buy and sell signals but do not tell you whytime and money going to training courses, reading or
a specific stock was identified. They tell you whattrading the market, becoming a good trader, like
and when to buy and when to sell. The majorbecoming good at anything, will cost you time and
drawback of these systems is that they do notmoney.
teach you how to improve your understanding of the