How To Build a Stock Trading System For Your Life

Trading for a living is an exciting idea, and stock trading systems can give you the life you want. A system is simply a set of rules that defines how you will enter and exit the financial markets to make money. Stock trading systems work because they eliminate emotion, create consistency and capture an edge in the markets.

 Most new traders fail and lose money because they take tips from others, they do what is popular, they do what sounds good at dinner parties, they do what is marketed heavily by the industry, they use someone else’s stock trading system – they don’t do what is profitable!

I believe YOU can succeed where so many others have failed!

YOU can make money trading, YOU can live and work anywhere in the world and YOU can be free from corporate slavery. Building your own trading system that meets YOUR objectives, fits YOUR personality and gives YOU the life you want is the answer. I can show you in four simple steps how to build a profitable system that will work for you regardless of whether you want to trade the stock market, futures market or the forex markets.

My goal is to help you succeed by building your own profitable stock trading system that meets your objectives and gives you the life you want. Most new traders fail because they don’t have a guide to help them build a profitable system that suits them.

On your own this is a difficult journey – Let me help you become a profitable trader quickly! Make sure you also check out my new website at Enlightened Stock Trading to learn how to develop a winning stock trading system that suits your personality, your objectives and your ideal lifestyle.

 

Where To Start When Building A Stock Trading System

There are countless courses, expensive subscription services and systems for sale in this industry. None of these is the answer in isolation…

…The answer is to design your own trading system with an understanding of yourself.

Let me explain:

  • Someone who likes action will have trouble trading a long term weekly approach
  • The patient, considered person will find it difficult to move in to and out of the markets multiple times a day as a day trader
  • The person who likes to be right will have trouble with a trading style that is wrong 80% of the time (even if the remaining 20% makes a lot of money overall)
  • The person who is learning to trade whilst in a full time job will find it easiest to do their analysis after hours so their job doesn’t suffer and will need an end of day system which accommodates this.

The question that most new traders ask: “How do you make money trading?” IS THE WRONG QUESTION!

The question every trader should ask is: “How can I make money trading?”

Everyone is different, so you can’t make money consistently be taking tips from friends, following newsletters, subscribing to stock tipping services, reading newsletters, paying for expensive seminars to learn secret trading methods…why? Because these things all have one thing in common – they fail to take into account YOU!

The best place to start is with you!
What are your trading goals?

There are many misconceptions about how to make consistent trading profits.

The truth is you can build financial freedom through trading…

  • without being forced to watch the markets all day,
  • without day trading,
  • without high frequency trading,
  • without scalping,
  • without inside knowledge

Despite all the hype, these are just like a stressful job which chains you to the computer screen. You can have both free time and money. Medium to long term trading strategies can give you this.

The great news is that the best system is not complex or difficult to design.

No matter whether you trade the stock market, futures market, forex or options or any other instrument, the best system is one that you build for yourself so that you understand how and why it works.

My approach for guiding you is a straightforward and transparent process to trading success.

How To Build a Stock Trading System For Your Life

My 4 Step Approach to Stock trading systems 

 

Step 1: Set your trading system goals

You set goals in your personal and professional life; the same should be done when you’re working with financial markets and building your wealth. Establishing your own specific stock trading goals will steer you in the right direction when trading, rather than using someone else’s trading methods or performance levels that don’t necessarily reflect what you believe in (or are comfortable with). This can help you stick to your guns, achieve them one by one, and encourage you to be consistent. 

When setting up your goals, be more specific rather than vague (e.g., “be more disciplined”). Think about the kind of lifestyle you want to achieve with the help of trading, the amount of time you can spend on trading every day, the amount you can risk per trade, and the percentage of your maximum drawdown, among others. 

Step 2: Select the stock trading strategy that best fits you

Well-tested and successful trading strategies are vital for your trading success. There is no single strategy that works every time, but having a stock trading strategy that fits you makes it easier for you to stick to it when you have the inevitable losing trades. 

There are many trading strategies out there. The following are the most common:

  • Trend following: This is one of the best technical trading strategies because it is highly profitable, low maintenance and works across a wide range of financial markets. Trend trading (also known as trend following) buys stocks that are trending up strongly and holds them until the primary trend turns down. The great thing about trend following is the winning trades can be HUGE so you don’t need many winners to have a very profitable trading year. 
  • Swing trading: This is a trading style that is a more active form of trading compared to trend following. Swing traders profit from the swings up and down around the primary trend. The benefit of swing trading is you generate a higher trade frequency than trend trading, however the average profit per trade is much lower 
  • Mean reversion: This trading method positioning yourself against short term extremes. For example when there is a sudden drop in a stock because of unexpected bad news, often the market over reacts in the short term and then bounces back 1-5 days later. Mean reversion traders profit from this bounce (the reversion to the mean). 

Step 3: Build your stock trading systems the right way

A stock trading system is a complete set of rules that tell you exactly when to enter and exit the market as well as how much of a stock to buy and where to get out if you are wrong. One of the main benefits of adopting a stock trading system is it reduces the impact of human emotion because you ignore all other information and just follow the rules. The system provides trading signals based on the share price data and the rules you specify in the system. Trading systems are the most effective way for traders to get profitable because they reduce the impact of emotions, reduce mistakes and give a profitable trading edge which can be backtested.

There are 12 trading systems components you must look into when building and designing your system. But the 4 core components you should be familiar with are:

  • Trade setup: The conditions where you will look for trades.
  • Entry signal: The definite entry point into a trade.
  • Initial stop loss: The level you would break out if the trade experiences a loss. 
  • Exit signal: Shows when you would close a trade. 

Step 4: Document your trading plan

To help you succeed, you need to lay out your trading plan. This should determine how you will approach the markets, manage your trading account, and all aspects of your trading business. Your trading plan will also document how you will navigate market crashes or any other crisis that affects the markets, and how you’ll protect your account if anything happens. Successful traders prepare for any unforeseen events in the future, whether in the financial markets, a natural disaster or a personal / family emergency, to protect their investments. 

Additional Considerations: 

 

Many traders end up losing all their profit in a couple of bad trades, mostly losing money on highly leveraged trades that didn’t work out as they expected. Risk management allows you to minimize losses and keep your account from losing all your money. You need to implement a strategic approach to plan your trades, set a stop-loss and manage your total instrument and market exposure to ensure you will not blow up your trading account. 

 

Having a reliable software to test your trading system ideas, monitor the markets, opportunities, and trade execution are crucial to your success in stock trading. These tools can also help you make objective and consistent decisions since they’re not influenced by psychological biases. I recommend Amibroker as one of the best value trading softwares available. For speed of backtesting, optimization, flexibility and value for money, Amibroker is by far the best trading software on the market for stock traders.

 

There are countless trading books out there that offer valuable knowledge that can help you further understand how the industry works, what strategies professional and top traders use, and other insights that can help shape your goals. Here are a few titles every trader must have on their shelf:

  1. Trade Your Way to Financial Freedom by Van K. Tharp
  2. Market Wizards, Updated: Interviews With Top Traders by Jack D. Schwager
  3. Trading Systems and Money Management by Thomas Stridsman
  4. Evaluation and optimization of Trading Strategies by Robert Pardo

 

Trading mistakes can be costly. Some common trading mistakes involve emotion—boredom trading and FOMO (fear of missing out). Before you enter a trade, weigh the upsides and downsides. The best way you can avoid making the same mistakes is by taking note of what went wrong and how it went down. Be aware of how you tend to react to certain situations. Understanding your own psyche will allow you to see the bigger picture and avoid acting irrationally.

Ready to Get Started?

I had precious little support on my own journey to trading success. It took several years to find an approach that gave the lifestyle I wanted. My goal was freedom through trading, not a full time trading job.

There was very limited useful support in the trading industry, and good resources were difficult to find. I gradually developed my understanding of the psychology of trading and investigated numerous trading strategies and investing approaches. I read countless books on trading systems, designed and tested my own systems, learned the software and found my way…

…Many people fail because this is a challenging path, but the outcome is well worth the journey. I hope that sharing my journey brings you success and shortcuts your learning curve to trading profitably.