My Trading System

I have a theory that an expert musician can only get on a stage and play freely and creatively if he has mastered the basic, boring, unstimulating disciplines like scales, arpeggios, rhythms and timings. Hours spent practising releases him to fly on the stage.

It is worth taking your time to get the nuts and bolts sorted out. Avoid the hype. Just get the facts. What it is, how to use it, what is the risk and what is the reward, how to measure it.

I have been careful to make sure that my plan has built in diversity of strategy, risk and reward. All systems do well sometimes; all take a dip sometimes. I include in my plan strategies such as longer term investment in high dividend stocks and funds (always reinvesting the dividends); medium term investment in growth stocks (this requires the most analysis); selling credit spreads; trading options and sometimes, penny stocks.

I try and keep an equal amount of my portfolio in each strategy, and re-balance each year. This means that some of my faster growing (but higher risk) strategies will feed into the slower, safer strategies, so there are multiple streams of growth.

My trading system is simple, and can be described on two pages. There are some unshakeable principles, and some variables, and some conditionals.

The key for me is to keep the technical analysis simple. I only analyse what I need to analyse, and keep the heavy stuff for pure academic interest. For example, when I sell credit spreads, I ONLY need a simple trend analysis. For trading options, I need a trend analysis and a swing analysis. Any more than that leads to unnecessary complexity, which leads to anxiety, which ends up in mistakes.

Although my plan is good, and has helped me become a very successful trader, I still keep learning. By doing this, I can tweak my plan and make a good plan even better.

More than that, learning has helped me to keep a hold of the big picture, and not get bogged down in the detail. Being too close to the coal face is often not helpful - you lose direction. I always put my newly learned lessons into the perspective and context of what I know already. I like to keep it fresh!

I have built fun into my plan. This means a lot of things:- time out with my family, rock climbing with my son; teaching my daughter to drive; interacting with people other than traders; barbecues.

I trade to live, not live to trade.

I get rich so that I can enjoy life!