The word “strategy” has become so overused in our vernacular; it has now become completely void of any value or meaning. We live in a world abundant with strategies; there are video game strategies, sports strategies, marketing strategies, weight loss strategies, makeup strategies, dating strategies, business strategies, financial strategies, pet grooming strategies, wedding strategies and even potty training strategies.
It’s a shame that “strategy” has lost its mojo. There was a time when the concept of strategy was only reserved for powerful and great leaders. Strategic thinking was a product of the brightest and most brilliant minds. After all, history reminds us that strategy allowed Alexander the Great to conquer the entire known world before reaching the age of thirty.
As a young student of Plato, Alexander learned to understand and appreciate the importance of strategy. At an early age, Plato taught Alexander the process of strategic thinking. Alexander implemented it and conquered the world. Alexander realized that strategy determined the outcome of any battle before ever going to the battlefield.
Unfortunately, the importance of strategy is often overlooked, misunderstood or completely ignored by traders. Every day, many traders continue to enter the markets without any kind of coherent strategy. Even traders that are using a trading signal system often do not understand the basis or theory behind the strategy that they use. Other traders often mistakenly believe that their sheer tenacity and persistence will provide them with their winning strategy. They courageously take their hits, accept their losses and persevere, hoping that their next trade will be the winner that will wipe out all prior losses.
It is important to understand that simply changing from one bad strategy to another will not produce a winning strategy. To be successful, a trader must learn to understand the market and to develop a winning strategy based on his or her own knowledge and skill. The essential secret ingredient for a successful strategy is the market theory and the trader behind the strategy. Strategies cannot be developed in a Vacuum. As a business professor, I have spent most of my career studying, researching and teaching business strategies. One common thread that links all successful strategies is that they are all based on a clear understanding of the environment where they will be applied.
This same principle holds true for trading strategies, every trader must understand and practice the strategy that they use. A “trading strategy” is not a one size fits all. The dynamic and volatile nature of financial markets requires a multitude of different strategies for different market conditions. This is why you will never find a single winning strategy or a signal system that will work equally well under all market conditions.
A winning strategy must start with an understanding of the market landscape. Once a trader understands how the market works, they can then decide and determine the opportunities that they wish to capture. They can select the right market landscape for their risk tolerance and profit goals.
Once that is accomplished, the trader uses a structured trading approach to test the opportunity or opportunities that they have identified in the market. It then becomes time to paper trade your strategy, to track the results and to evaluate performance. After the strategy is improved, practiced and proven, the trader can then begin to apply it with skill and confidence in the live market.
Successful entrepreneurs do not follow the signals from someone else’s strategic plan. They understand that they must learn to develop their own strategic business plans. This is what distinguishes business leaders and sets them apart from the pack.
In my experience, I have found this also to be true among traders as well. Traders who continue to spend their money looking for the “holy grail”, the best indicator, or that secret winning method unfortunately miss the secret of winning. The secret lies in your own ability to understand the market that you choose to trade and your own ability to develop the strategy to capitalize on the opportunities that you have learned to identify.
At strategic trading, we provide the knowledge and education to help traders learn to understand the market, to develop, to test and to evaluate trading strategies. To be a successful winning trader, do not look for someone to sell you a fish, look for someone to teach you how to fish.
