Trading Systems

Every long-term successful trader has a stock trading system. There are as many systems as there are traders. Every successful system has evolved through time and continues to evolve with the ever-changing markets. A successful system for trading stocks five years ago would likely not be as successful today without some ongoing tweaks and updates.

The most important aspect of a successful stock trading system is that it must allow the user of the system to be "systematic and unemotional." Some systems are so automatic that they can be programmed to let computers do all of the decision-making. Others do not go quite as far: the computer may generate a trade signal, but it is up to the system user to pull the trigger on each trade. Finally, some systems are not automated at all and consist solely of a mental checklist that the system user goes through before every trade that he or she takes.

Similar to their stock counterparts, options trading systems range from fully automated to a simple mental checklist. These systems may be generic in nature and simply identify that a bullish, neutral or bearish option trade should be employed, without specifying the exact options trade that should be placed. Other options trading systems, though, are very specific. That is, each system is related to a certain type of options trade, e.g. a butterfly or an iron condor.

No matter which trading system you use, don't forget to tweak and revise it as needed.