Post #49: My trading system flowchart

Lately, I am making an effort to make my trading as systematic as possible.  My goal is to set definite trading rules that will eliminate any second-guessing and emotions in my executions. Below is an overview of what I am currently doing.  I decided to show it in a flowchart form.

The very first step is to asses the general market's trend. This is where I will decide whether the market situation is favorable or not. It is also where I decide if how much of my capital will be put into position and how much will stay liquid. For example, in a down-trending market I might want to be only 25% in position and stay 75% in liquid cash.

Stock selection is where I decide what criteria will be factored in before a stock enter my watch-list. I am using both technical and fundamental factors. For example, I like stocks that are showing tight volatility ranges with increasing volumes. Fundamental factors includes P/E ratios, float % and many others.

Specific entry criteria is where I intend to enter a position. One example is a good upside breakout of a tight ranging stock with above average volume. I am looking for various set ups and I'm using a specific entry point strategy to avoid confusion in my execution.

Risk management is where I set up entry stops, position sizing, trailing stops and my risk tolerance. This is where I also scale my position up to avoid getting hurt in whipsaws. I believe this is one of the most important process that traders should focus.

Selling is where I set specific rules on when to sell my positions. Example of this is when the price hit my trailing stop or when the price is showing some topping signs.

Last, but also the most important part of my system, is the feedback and trading review part.This is where I review my trades to see if there's any part of the system that needs to be revised for improvement. No system is perfect, that's why constant feedback is important.

That's how simple my system will be. Although revision is expected, I will try to always keep it as simple as i intended it to be. There is no need for an over-complicated system, but at the same time you also need specific rules and system if you want to be successful in this endeavor. Otherwise, your trading will be driven by your emotions and it will become just some random buy and sell transactions without any clear justification.