How to find an Approach, Strategy, & Money Management
How to formulate an approach that is right for you:
Before making a trade, only YOU (not your broker, friend, or advisor) should consider the following variables: the size of your account, how much you are looking to expand it, how long you are willing to wait to do so, and lastly, how much you are willing to lose. This process is vital to the foundation of your approach to trading. Unless you know the answers to those four questions you will most likely never be comfortable with your trading, have difficulty in knowing what time frame to trade in, utilize discipline, be able to remain unemotional, and to have a plan that will reflect your goals.
Example of the four questions; you have a $50,000 account and your goal is to double your account. Now, how much time are you willing to wait, and how much are you willing to lose. After knowing the first two questions, the answers of the next two questions will allow you to formulate the strategy with the proper risk and money management.
One person might not be happy making 20% on a trade, while another would be glad to make that in a year. If the risk taker faces no action, they usually become emotional which allows the break down of discipline, and unable to execute their plan. Another trader might not be able to execute because they get emotional when the market gets active. This is one reason why trading is an art with infinite possibilities.
Now that you are comfortable with your approach, the next step is to know the best strategy based upon your thoughts, ideas, and time frame to formulate the trade. The strategy being used is the essence of reflecting your approach and trade idea.
Choose the right strategy based on your knowledge and experience. Money management and risk/reward is an integral part of your strategy, and should be reflective of your approach. If your knowledge is limited, I would suggest reading and learning the basic, most simple information, and progressing from there.
If you have no time for learning or wanted help, get someone to assist you. This could be a consultant or market strategist, that only get paid for their time, or a broker that can provide the same services and execute your orders too, but get paid when you trade. There are many excellent brokers out there, but like all professions, there is the good, the bad, and the ugly. Be Careful!
If you do not want to trade and want someone to trade for you, either a Fund or CTA would be the logical choice. You can find many online or through a brokerage firm managed accounts program. You will find their disclosure document contains their background, trading approach, performance record, risks, conflicts of interest, and more. They must be registered and are regulated by the CFTC. With this information you can select the program that is most reflective of the approach that is right for you. NEXT
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