How to Study Specific Commodity Systems

You made it this far in trading, but now you want to take it to a greater level. What do you do ? Well you study trading systems from those professionals who have proven through thick and thin time and time again that their system works to make profits. That's easier said than done, that is why so many people pretend to to have a special trading technique, stock picking system, commodity system, etc. In order to study specific commodity systems properly you will have to do the following:

Know the proprietor

It's important to know who created the system. Is it someone new no one has heard of, who is a great salesman and really likes to gamble when it comes trading ? Or is it someone with a guru expertise or a professional background. Keep in mind, that it doesn't always take somebody who has been in the business with industry experience to be great systems traders. Sometimes, the best systems traders are academic types with backgrounds in the sciences, computers, and/or math.

Know the context

The context in which the analysis is being made for the specific commodity system is very important. For instance, the economy might be booming and the system is showing glorious figures; however, how does the system fare when the context (the state of the economy) inevitably will change ? This is very important for those who will be using the system, a simple understanding of computer programming and investments can calibrate this in his or her favor.

Analyze creatively

Analyze the system in any way you can possibly imagine. After all, not one person nor many people truly understand all the market has to offer and how to become rich in it. It doesn't hurt to analyze creatively somebody's ideas. In this way, you can learn to create your own system. For example, Mr. Bollinger became a noble economic laureate for his understanding of how on average market prices do stay within a statistical bounds that is significant. Yet it is commonly known that markets do not behave "normally" within statistical measures. Therefore, there is great room for creatively looking at Mr. Bollinger's ideas which are expressed in bollinger bands, a widely used technical indicator.

Back-test

No system can predict how the markets behave. Also, no system can predict how profitable it will be. However, a system that has been back-tested and shown to be reasonably based on sound principles of trading, applying economic coherence can prove to be the greatest quality for any investor or trader. This back-testing involves a great deal of historical data, the more the better. One can be supplied by their broker or a third-party data vendor.

Above all, you need to know the worst case scenario, among other degrees of catastrophic scenarios financially for the specific system. Don't be fooled by glitzy numbers and charts, you have to trust your common sense and understanding of markets in order to sift through systems of gossamer and those systems that can withstand the tests of time.

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