Basic Techniques  |  BON 2007

What’s Your Trading Style? by Martha Stokes

What’s 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, let’s 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. TRADING STYLES 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.

by Martha Stokes, CMT