Trading System Ė Finding The Trends
It is safe to say that everyone who is trading commodities wants to make money. In spite of that incredibly obvious observation, there is a kernel of truth to be found. While everyone wants to make money with their investment strategies, there are investors who do not prepare for success. Trading plans, technical analysis and trading systems are all valuable parts of the equation yet many people donít take the time to implement them, hindering their own success.
The Whole Picture
The recipe for a successful investment philosophy is only as good as the sum of its parts. If your trading plan is solid but you donít do technical analysis, you going to have problems. If you perform your technical and fundamental analysis but you donít have a trading system, you will struggle to succeed. If you donít have the best trading system available, you are likely to leave profits on the table during your futures and options trading. No matter which part you consider, if you donít emphasize them all, you are going to be weak in a very important facet of your trading.
This is where it all begins. While you may rely on your trading system to help you ultimately find the targets for you acquisitions, your trading plan is what will get you to the place where you are ready to search. Will you invest in the stock market or commodities trading? What plans will you put in for stop loss strategies? What about your investment philosophy? A well constructed trading plan will help you with these questions and many more, especially when trades are happening quickly and you are tempted to react with your emotions. Just as a trading system is the voice of common sense for your target acquisitions, your trading plan is your voice of reason for your business decisions.
After you know what you are going to do and have your plans on how to do it, you can get down to the business of learning. Technical analysis is really about education. If you understand the commodities that you are trading and the factors that affect their prices, you have a distinct advantage in picking profitable trades. You donít know about pork bellies? Donít trade them. You have researched oil futures and understand the dynamics of their price movements? Seriously consider investing there. This is important because if you understand a commodity, you are likely to understand the things that make its price move, whether it is the weather, demand or the latest news report on the 6 oíclock news.
Once you have a trading plan and you have started performing fundamental and technical analysis, you need to put a trading system into place. The trading system represents your approach to following price movements of your target commodities. Trading systems can be simple like bar charting or more sophisticated like Japanese Candlesticks. Bar charts will give you information like the open and close of a particular stock. With a bar chart you can get a general idea of how a commodity has been trending but nothing about where it is going in the future.
Japanese Candlestick charts offer you much more. This trading system offers opening prices, closing prices, highs, lows and whether the stock was up or down overall for the day. In addition, this trading system offers powerful analysis tools based on several hundred years of use.
Each part of a successful traderís approach to his or her investments is crucial. The trading plan, the technical analysis and the trading system all contribute to the investorís ability to create profitable investments.