A rules-based system for all world commodities

Only Charting Software that requires NO PROGRAMMING; Be Among the First!

Quantum Charts. QC is a new charting system development program that will blow you away. QC can uncover and create automated trading systems with absolutely no programming required. QC uses new technology that allows traders to quickly and easily create simple to complex trading systems in mere minutes with only a few clicks of the mouse button. QC also includes everything contained in this article, and much, much more. To get a sneak preview of the incredible power Quantum Charts puts at the fingertips of individual traders, go to the following link. My suggestion is that you sit down before you read more about Quantum Charts. You might be so excited your knees buckle.

http://www.quantumcharts.com/SneakPeak.html

In my last article ("Truth" ), I discussed discerning between what was true and what was not true in the world of trading, and specifically, technical analysis. Determining what is a true statement and what is not a true statement when looking at technical analysis can be the difference between making the decision to trade a strategy and making the decision to pass. This, in turn, will ultimately determine whether you are profitable in your trading endeavors.

These two articles (part I & part II) deal with things that most traders never think about. To be a successful trader, you must go the extra distance to understand what you are doing, why you are doing it and what the consequences are of each decision. If you do not, any success you have will most assuredly be temporary and soon replaced by a more persistent and dramatic negative experience. The odds have been consistent for as long as I have been in the industry (and I started before personal computers were ever used by individual traders). Before a surge in technology "equalized the playing field" for individual traders, the estimated number of successful traders was about the same as it is today...nothing significant has changed.

Accordingly, technology is not the answer to your success. In fact, technology cannot even help you if you do not use the technology within the context of sound trading principles. There are still principles that must be adhered to, trading laws that should be followed. One of these principles involves the arduous task of determining what can be stated as true and what cannot be stated as true. The reason many traders fail to follow this principle is that it moves us deeper into the study of trading than most are willing to go. It is an area that is not addressed by too many in the industry, and therefore not really that popular. But truth is, it doesn't sell. What sells is what you want to hear... "you will make a bazillion dollars simply by following this strategy in your account." There is no thinking, no work, just passive income and lots of it. But how do you know which strategy can be trusted, and which strategy is to be avoided like the plague? They all claim the same thing...how do you know whether the claims are legitimate? How do you know when the strategy you determined to trade is still a strategy to be followed when it goes into a drawdown...or a strategy to be dumped?

I have quite a bit of experience developing and trading automated systems. Out of over 1,000 systems developed, I have actually only traded a handful over the years. These have ranged from scalping to long-term trend following, to option trading strategies based on everything you can imagine. Most of the systems I developed over the years show some sort of profit on paper during the development stage, but most I would never actually risk money on. Why? Because the numbers don't always reveal the truth about what can be expected. You may have heard that the numbers don't lie, and this is true...but you have to be able to discern what the numbers are saying. If you don't take the time to learn this, you will look at a statistical performance report and interpret the numbers as telling you that the strategy is worth trading, when in fact, those numbers are telling you to stay away, or at least be very cautious.

Granted, there is some ambiguity in discerning the numbers, which I suppose is part of the reason some don't take the time to really understand them, but there is also a difference in what some traders are willing to risk, or not risk. One trader is willing to accept the risks of a particular system while another is not. Therefore, a trader must not only discern the numbers, but also accurately discern them in the context of his/her risk tolerance levels.

When analyzing a trading opportunity, either in the case of an automated trading system track record, or in the case of an actual trade track record regardless of whether the trades came from a set of rules or not, there are certain stats that are very useful, and some that are less important. Unfortunately, there are also a set of statistics that are vital but not provided by any of the system development platforms out there (until next month anyway). I will be going over these three categories of stats for the rest of the article.

I realize for some, this may be boring...but it is needed. I'm not here to entertain you. I'm here to try to pass on a little bit of my 18 years of full-time experience and research with the end goal of increasing your success as much as I can with this short article. Therefore, if you are tempted to move on, you should ask yourself whether you are trading for entertainment value, or trading to succeed. There are more hard questions that every trader, including myself, has to ask on every trading venture.

Stats Not Available on System Development Programs (Until Now)

I could never understand why system development programs do not analyze market movement prior to requiring a trader to slap on an entry or exit rule to a trading system. I once wrote an article back in 1995 on the subject of market movement and maximum profit potential. Because of limitations in current system development programs, some traders waste endless hours looking for profitable systems when the underlying market action does not support it. For example, I took a chart and calculated the distance from each major peak. Distance between peaks simply had to be a certain number of points away. If my memory serves me correctly, I did this on a daily Live Cattle chart for a period of 1-year. During that year, if a trader would have bought at the bottom of every major peak down and sold at the top of every major peak up, they could have made a total of $8,000. What prompted me to do this was a complaint by one trader that his Live Cattle trading system only made something like $2,500 that year and he was going to look for another system. However, that system captured almost 1/3rd of the maximum profit potential allowed by the underlying market movement. That is tremendously solid.

This is why simply looking at the net profit of a system is not enough...or even that important outside of additional information. Analyzing the underlying market action is critical to provide proper context. Let's say you want to know what happens if the Stochastics indicator is above 80% and the volume spikes higher on an up-day. With current system development software, you can't just research what the market does, you have to stick entry and exit signals on a system first (until now). However, you need to research market action first. Accordingly, the first thing that needs to be done is require those three conditions to occur and then look at market action stats for every bar after the occurrences.

Only Charting Software that requires NO PROGRAMMING; Be Among the First!

Quantum Charts. QC is a new charting system development program that will blow you away. QC can uncover and create automated trading systems with absolutely no programming required. QC uses new technology that allows traders to quickly and easily create simple to complex trading systems in mere minutes with only a few clicks of the mouse button. QC also includes everything contained in this article, and much, much more. To get a sneak preview of the incredible power Quantum Charts puts at the fingertips of individual traders, go to the following link. My suggestion is that you sit down before you read more about Quantum Charts. You might be so excited your knees buckle.

http://www.quantumcharts.com/SneakPeak.html