People who’ve tried trading have one dream — to earn a lot. Obviously however, this is not something you can accomplish with the snap of a finger. You need to put in long hours and a great deal of effort. Also, you’re required to develop excellent analytical skills and instinct for good trades.
This is what makes black box trading systems attractive for some. These are essentially pre programmed systems that traders can use to gather recommendations on which stocks to trade. For beginners, it’s extra tempting to buy these because you don’t even have to break a sweat to find what to trade.
What isn’t easily apparent is that no good can come out of using these types of programs. One reason why it’s a bad idea to use them is because they don’t explain themselves. Black boxes offer suggestions on where to put your money but never tell you why. That’s almost as if all they’re doing is guessing which is never a good trading practice simply because you need to understand what goes on behind the scenes to be able to conclude if you’re taking a risk that’s reasonable or manageable.
It’s also worth noting that auto programs don’t think about the differences among individuals who use them. Differences among traders are actually major points to look into because people don’t share the same trading preferences or risk tolerance levels.
In summary, black box trading isn’t flexible enough to be helpful or useful. It also lacks the human factor that allows deep analysis. It’s as if all you have is a tool that can make guesses on what to trade. This implies that it’s simply not wise to trust a program with your hard earned money.
Rather than spend money on black boxes, you need to spend time and effort on creating your very own trading plan. Your personal plan or system serves as a guideline so you’ll know when you should start to trade and when you should leave a position.
Unlike programmed systems, a custom system takes into account human factors. The most important of these is your tolerance for risk. With a system that’s truly yours, you can ensure that you never lose more than you’re able to bear.
So how do you come up with your own system? You can make your very own unique plan or you can take someone else’s and make it your own. What this means is you can adopt an already successful system, make revisions to it so it fits your preferences perfectly and use it to guide your trading decisions. The Darvas plan is an example of a well known system used by others.
It can actually take time to find the right system for you. Many top traders have had more losing streaks than winning ones at the start because they took time to test various systems. In the long run though, it’s well worth pouring your resources into finding the best fit for you.
For sure, trading is the way to go if you want to save enough for your future and a comfortable life. You do have to make sure though that you don’t get tempted to try out what looks easy. A black box system just won’t make the cut for you.