Strategies vs Systems (Part I)

Trading systems are capable of generating consistent profits while trading strategies are optionScam.com (see http://www.optionfanatic.com/2012/04/21/optionscam-com/).

Trading strategies are available everywhere you look.  You can find trading strategies in books, through webinars, on internet sites–this list goes on and on.  Strategies are often marketed through long advertisements that promise huge ROIs and large compounded returns.

Trading strategies appeal to human greed.  They are sought after and commonly sold for hundreds to thousands of dollars.  Expensive trader education programs generally teach strategies.  If the market is bullish (bearish) then do X (Y) trade.  If the market is stagnant then do Z trade.  You can spend lots of money learning what kinds of trades will optimize what trends.  At the very least, this makes you dangerous although it may not make you profitable.

Trading strategies are well illustrated by single trades in isolation, which is hardly the reality of live trading.  By applying the strategy guidelines to a particular trade, you can learn its strengths and weaknesses.  Annualize that ROI (as if!) and human nature has already taken over.  “Imagine what X%/year can become over the course of decades!”  Human nature needs a reality check.  The only way to generate consistent income and meaningful growth is to trade as a business, which single trades in isolation are not.

A trading strategy is not a trading system because it lacks detail about money management.  Money management addresses Risk of Ruin for the entire portfolio.  Making money without studying this is luck at its finest–luck that will eventually run out.

For these reasons, trading strategies are generally not actionable.  This makes trading strategies optionScam.com.  In future posts I will go into more detail about this important concept.