Whatís Your Trading Style? by Martha Stokes
Find out which trading style will work for you.
There is considerable confusion among traders
as to the difference between a strategy, a
trading style, and a trading system. A trading
style is not a strategy or a trading system. It is
a set of parameters and rules you adhere to for
every trade you make.
Trading styles are as individual as each trader. Once you
have a trading style fully developed and implemented, your
trading results will improve. A thorough understanding of
trading styles will help you eliminate two common problems
that plague traders: uncertainty and inconsistency. To understand
the difference between a trading style and a trading
system, letís review trading systems.
The term trading system is used to describe a conditional
approach to trading a certain kind of market. Trading systems
have been developed to function in varying market conditions.
It is important to understand what kind of market
condition the system you choose works in best because the
market is ever changing. If you use the wrong trading system
for the current market condition, such as using a trend-based
system in a consolidation or choppy market, you will get
whipsawed out of your trades repeatedly, eating away at your
profits until nothing is left of your capital. So it is critical for
you to know for which market condition your trading system
was developed to function optimally.
A trading style is a predefined set of rules and parameters that
you use regardless of your trading strategies or trading
systems (Figure 1). A trading style is the first thing a trader
needs to develop before becoming consistently successful at trading.