Market Overview

The You Factor, Part 2 of 3, Know the "How" of Your System


In order to have excellence or success in any arena, a professional is required to practice. They aren't instantly successful. You wouldn't let a brain surgeon operate on you fresh out of med school would you?  Part of any professional's job is practicing, whether they are doctors, athletes or musicians. They have to know how to do their surgery, their plays, their sport, or their notes and they have to know how to do it well.

As a trader, practicing to know how your system works is important, if you want success and profits. Once you have found a good system based on market theory, one that limits your losses and lets your profits run when trend trading, is price action driven, and has defined steps that account for the proper expectation of movement and volume, you have to learn how to work its steps inside and out.

Know the Exact ABC Steps of Your System, and How It Works

The ABC’s of your system is how your system works. How to read the market are your 123’s, or your style. Those ABC’s of how it works should be very clear and specific. The system needs to have specific rules, of exactly when to enter, exactly where to put your stop and exactly when to trail it. If you don’t have those ABC’s predefined, you are going to be trading by your gut feelings; sometimes you will nail it and sometimes you will get destroyed. You will have no consistency, because you don’t have a consistent system, defining to the tick or pip, where your entries and stops are. You won’t have the confidence to execute your moves because you have doubt. Your trading will be hit or miss because you will be shooting from the hip, trying to trade.

The Alternative

You could end up putting yourself in a position of self-pressure, causing you to make alternative choices. You need to know the rules by muscle memory.  Not knowing the rules of entry, exit, and take profit can cause you to take too long to put in an order. Or, you could hesitate because you aren't absolutely sure this was the right place for your entry, stop or trailing stop. Then along the way, you may start taking too much risk, like putting all your trading capital into one trade because you need to make money now.  You might be doubling down, revenge trading, trading too little, exiting too early, or trading risky percentages like 30% of your account size on every trade. When that happens, probability goes out the window; there are no probabilities working in your favor. There are many things that go into trading psychology. You must know what you are going to do, how you are going to do it and you must know this by muscle memory, which requires practice, or you won’t follow your rules.

Once you have a good system and you know how it works, you also need to know why it works. You need to be able to read the market and understand why your system works and why it is able to make a profit. If you don’t also understand why it works, you won’t have the confidence and trust in it for making a profit. That, too, can cause you to hesitate. In the next part of this series, the importance of knowing why your system works and how that ties in with knowing how to read markets will be covered.

If you would like to learn more on how to use price action, expected range and volume in systems like a professional trader, go to Apex Investing Institute offers free education, and free access to the Nadex Binary and Spread Scanner Analyzers. Member traders are invited to trade in the rooms, take advantage of trade signal services, have key indicators and access the Apex Forum. The forum content is updated daily and includes over 7000 members. In a supportive learning community of seasoned as well as up-and-coming traders, traders of all levels learn how to trade Nadex binaries and spreads in depth, as well as futures, forex, stock and options, and gain an edge for successful trading overall.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: apexinvesting binary binary charts binary options binary scanner binary signals darrell martinBinary Options


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