The Secret to a Successful Trading Strategy

Asad Dossani
What makes a trading strategy successful? To answer this question, let's first break it up into two components.

The first component is an idea. For a successful trading strategy, we need a great idea. An example of an idea is: Buy safe haven assets when market volatility goes up. Another one is: Buy during an uptrend and sell during a downtrend.

In the Live Training Session we held last week, both of these ideas were discussed in detail.

At first glance, these ideas may seem overly simple to you. And you're absolutely right; they are in fact simple ideas.

But even though these trading strategies are simple ideas, actually using them to make money is not simple at all.

Once we have an idea, we have the second component: implementation. Implementation means turning this simple idea into a profitable trading strategy. This step is the tougher of the two.

Most people believe that the hard part is coming up with the idea. But if you do a simple Google search for trading ideas, a large number of them will come up. And plenty of these ideas can be used to build a successful trading strategy. So in fact, coming up with an idea is not as difficult as it may seem.

When it comes to implementation, this is where the hard work begins.

Suppose we wanted to implement a strategy that aims to trade with the trend.

First, we identify the timeframe we are working with. We may want to focus on short-term or long-term trends.

Second, we find a way to measure the trend.

And this is not as simple as it as seems. That's because there are literally hundreds of ways to do this. We could use moving averages to do this. We could take the ratio of up moves to down moves. We could measure the percent change in the price over the last month.

With each of these methods we have to make more choices. For example, if we are using moving averages we need to decide whether to use a simple or exponential moving average. We then need to decide the number of days of moving average. Next, we could choose to use just one moving average, or a moving average crossover.

My point is that you could come up with numerous ways to measure a trend. How do we decide what do to?

This is what makes implementation difficult. Interestingly, it is also the reason why many trading strategies don't work out. People often don't put enough effort into implementation of an idea, and spend most of their time on the idea alone.

But a trading idea on its own is no use unless it can be implemented properly. Whenever I am coming up with a trading strategy, I typically spend 10% of the time working on the idea. The balance 90% of the time is spent on implementing the idea. The reason for this is simply what we've already seen. There are a large number of ways to implement a trading idea, and we need to put in considerable effort to figure out the best one.

You see, the secret to a successful trading strategy is not coming up with an amazing idea. While good ideas are of course important, to secret to success lies in implementation. Successful traders learn exactly the best way to implement even the simplest of trading ideas to make a profit.

In the next e-letter, I will spend more time talking about how to implement trading ideas. So look out for it!

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10 Responses to "The Secret to a Successful Trading Strategy"
m.saravanan
13 Jul, 2014
m.saravanan/no/6goldannagar/mannarai/po/tiruppur/pin/641607Like 
Sanjay
12 Jul, 2014
Totally agree with Asad. Maximum loss in trading is attributable to have a plan when to exit, how much to exit, even when the plan is there in mind, it takes a lot to implement given the uncertainity. From that perspective looking forward to the Alpha trader, however, I assume it is not purely a derivative product?Like 
balaji kuber
12 Jul, 2014
i too missed the live trading session.,the loss is mine.now i look forward to avail your guidance .thanks and regardsLike 
Drjlbansal
12 Jul, 2014
Dear Asad,Although I have not seen the video on Alpha trader.Is it Holigrail?Is it better than Market Profile?Like 
M K Singh
12 Jul, 2014
It is some thing strange that we can get return of more than 45% in short term. It looks Impossible but due to faith in Equity Master I joined the Profit Hunter. We are eagarly waiting your next course of action.Like 
RAMANATHAN MAHADEVAN
12 Jul, 2014
It's good idea. I wish to avail this. Missed the live trading session. Would appreciate if there are some notes to be read or video that can be viewed. Do understand that there is nothing like "live" experience but it would help us to come to speed on the discussions. Regards RAMANATHAN MAHADEVAN 09944658660 COIMBATORE 12TH july, 2014Like 
J.S.Vanani
12 Jul, 2014
Viewed live session.Appreciable.Very useful for beginners also.Like 
d balakrishnan
12 Jul, 2014
Missed the live session. During week days it is not possible for me attend live sessions as i am working. If you can send e-mail of the session it will be appreciated.Like 
PRAMOD BAJAJ
12 Jul, 2014
It's good idea. I wish to avail this.Like 
Prash
11 Jul, 2014
Missed the live trading session. Would appreciate if there are some notes to be read or video that can be viewed. Do understand that there is nothing like "live" experience but it would help us to come to speed on the discussions. RegardsLike 
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