Friday, May 14, 2010

Formulaic Trading

I touched on this previously. But I want to elaborate right here, right now.

By no means am I an expert at investing, but I like examining how trading and investing relates to life. I like the trend analogy quite a bit, but I left out one important thing.

Again, as trading, as in life, I think that it's important to be as algorithmic as possible. In my experience, people get into habits of thinking they are awesome or above mistake. This is when they make the most errors.

The great thing about formulae are that they don't discriminate or vary. To trade a trend then, I need to have an objective concept of what a trend is. Seems obvious. For me then, in this instance, an uptrend is 3 higher lows on a daily chart, a downtrend is the opposite. I'll find an example and update this when I have more than two free seconds. But the point is, use formulas to eliminate human error, whenever possible.

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