The best trading strategy for you depends on many factors including your reasons to trade, availability, work preferences, requirement for flexibility and level of patience. As discussed in the trading strategy section of this site it is important for aspiring system traders to understand themselves before selecting their trading strategy for them and building a trading system.

The following questionnaire provides some of the knowledge required to start out on the path to selecting the best trading strategy for you. 

Answer the questions and then compare your answers to the descriptions of the common trading strategies to help you select the right strategy for you.

Answer the following questions (estimated time = 10-15 mins)

Reasons To Trade: 

Understanding why you are learning to trade will help you set your overall objectives and understand how trading will fit into your life. Answer the following questions in a couple of paragraphs each:

  1. What made you interested in trading in the first place?
  2. What are you aiming to get out of your trading?
  3. What will a successful trading business mean for you?
  4. How will trading fit in with the other areas of your life?
  5. Why is learning to trade successfully important to you?

Capacity And Availability:

The amount of time you are able to devote to trading will be a large determinant of the best trading strategy for you.

If you have a day job and can not watch the markets and place trades throughout the day then short term and day trading strategies simple will not work for you. If this is the case then you should consider longer term swing trading or trend following as a starting point.

Be precise about when you can place orders realistically every day. The best trading strategy for you is one that you relate to and can consistently execute. If you do not have the time required to trade a particular strategy then that, by definition, can’t be your best trading strategy. Your available time will also impact how you build your system (e.g. if you can’t be in front of a computer at the open then you shouldn’t design a system that requires you to place trades at the open).

  1. Can you devote a certain time to trading every day the markets are open? (yes / no)
  2. Can you focus exclusively on the markets during market hours without distraction? (yes / no)
  3. How much time can you devote each day to run your trading rules? (hours)
  4. When during the day are you able to run your trading rules? (before market open / during trading day/ aftermarket close / at night / it will vary / anytime)
  5. How much time outside market hours are you able to devote to research and development of your trading system? (hours)

Work Preferences:

The type of work you enjoy will impact the trading strategy that you are most suited to. The trading process should be enjoyable (or at the very least fulfilling) because you are going to be spending a reasonable amount of time pursuing it. Gaining an awareness of what type of ‘work’ you enjoy is therefore very important. Rate each of the following activities on a scale of 1-10 

(10 = “I live to do this”; 1 = “I can’t imagine anything worse”)

  1. Developing and testing logical rules using simple mathematics (1-10)
  2. Identifying a trend and taking advantage of it for as long as possible (1-10)
  3. Researching and learning about companies and industries  (1-10)
  4. Studying macroeconomic trends (1-10)
  5. Searching for a bargain/value that no one else has identified  (1-10)
  6. Searching for relationships between different things to find opportunity (1-10)
  7. Making quick/nimble decisions to take advantage of short term opportunities (1-10)
  8. Looking for profitable patterns that can predict future moves (1-10)
  9. Performing complex mathematical studies and programming (1-10)

Requirement For Flexibility:

Understanding your ability and willingness to follow strict rules is important in selecting the best trading strategy for you and designing your trading system.

If you are comfortable following strict rules to the letter every time, then pure systematic trading with no discretion will likely work well for you. If you feel the need to add your own judgment to supplement your trading system rules then you will need to build a trading plan that allows that. Rate each of the following activities on a scale of 1-10 

(10 = “I live to do this”; 1 = “I can’t imagine anything worse”)

  1. Follow a set of rules every day regardless of whether you ‘think’ that they are right or wrong on this particular occasion (assuming you know your rules make money in the long run)  (1-10)
  2. Perform a set of tasks every day to ensure you don’t miss an opportunity (1-10)
  3. Perform a set of actions once a week so you don’t miss an opportunity (1-10)
  4. Apply flexible judgment to your decisions depending on what makes sense at the time (1-10)

Level of Patience:

Understanding your level of patience and willingness to wait for trades to emerge and profits to develop is important in your selection of the best trading strategy for you.

The more patient you are as a trader the more flexibility you have to adopt different trading strategies. Highly impatient traders are limited to shorter term trading systems with lower long term profitability. Rate each of the following activities/needs on a scale of 1-10.

(10 = “I live to do this”; 1 = “I can’t imagine anything worse”)

  1. I am comfortable waiting as long as it takes to maximize the profit from a particular trade. If a trade takes months to reach its maximum profit, so be it (1-10)
  2. I am comfortable doing nothing until I get a trading signal, I am happy not placing a single trade for weeks knowing that my system will get me in at the right time (1-10)
  3. I am willing to give a profitable trade some room to move rather than taking profits now knowing that this improves my profitability in the long term (1-10)
  4. I want regular action and regular certain profits – I need to be constantly taking action (1-10)
  5. I want to place trades regularly – every day is preferable (1-10)

Now that you have answered these simple questions, review each of the common trading strategies to select the one(s) which make the most sense for you based on your answers and the descriptions provided. There is generally no one ‘best trading strategy’, but there are trading strategies that are better / worse for you. 

Trading is a continuous journey of growth and self awareness leading to greater and greater profitability. This questionnaire will start you on your way, but we also recommend you keep a trading journal in which you record your journey in detail on an ongoing basis.