Traders use different approaches in their trading. There are always advantages and disadvantages of different systems. Majority of successful traders use self developed mechanical trading systems. The majority of unsuccessful traders depend on discrete trading method.
Many traders use their own developed trading systems. There are many actively developed trading systems for sale as computer programs also known as Expert Advisors or Robots. Theses robots vary widely in prices. It can be from a few hundred dollars to a few hundred thousand dollars.
The significant advantage of these programs is that they generate signals that can be used by the trader for trading. Sometimes these computer programs are developed for a certain bank or a corporation.
The discrete trading method used by many traders is like an artist trying to adapt to different market conditions and using flexibility and tactics corresponding to the particular market condition.
In case of a discrete trading method, the traders mood and health can greatly affect the outcome of each trade. The main disadvantage of the discrete trading approach is due to the stress factor influencing the trader, the unstable trade results.
Using a mechanical trading system almost completely influences the stress factor and reduces the negative pressure on a trader which is obviously a big plus. However, it prevents the trader from quick adjustment of trade tactics under changing market conditions.
It also doesnt allow the quick customization of the trading system in cases like the change of the account size. There are eight requirements that any ideal trading systems should fulfill.
1. A trading system should allow for the maximum adjustment to any traders psychological character and makeup.
2. The trading system should depend on trading methods that are universal. It should not depend on a particular market condition at any moment of time.
3. It should be simple, logical and depend on understandable ready to use elements and units.
4. The trading system should provide specific price signals for the trader for entry and exit positions some time in advance.
5. The trading system must allow some room for the traders creativity. He/she should have the ability to tweak the system.
6. Without violating its main principles and elements of the trading system, there should be some flexibility to modernize. The trading system should adjust in accordance with the changing market conditions.
7. The trading system should relieve the trader from emotions. It should remove psychological stress in trading and should be ruled based that do not depend on emotions.
8. It should be customizable. Different traders can use the same method with different account sizes and different risk/reward appetites.
Change of market conditions could lead to negative results from a previously effective trade system. No one trading system can fulfill all these requirements.
The only way of satisfying these conditions is through developing a diversified trading system. Trading systems based on these requirements could be complex and adjustable. It can consist of a set of systems that can be used as the basis for specific trade tactics at any given moment.