It is a very simple process to stack the odds in your favour and that is to follow a strategy that is profitable.
This may sound condescending to you, but you will be very surprised at how many traders do not have a profitable strategy to follow, and even some of those that do, don't follow the strategy anyway.
Developing a profitable strategy can take an enormous amount of time, but ultimately is worth the time and effort that you contribute.
Its All About Probabilities Do not enter the market unless you know that your strategy delivers results, both historically and in real time testing.
There are literally thousands of possibilities that you could pursue when developing a trading strategy based on a wide variety of different ideas.
The one thing that all strategies have in common is that they skew the odds in your favour.
So every successful trading strategy comes down to probabilities.
So a successful trader thinks in terms of probability.
Is the probability higher that the market will move up or down from here? If the probabilities are in your favour then take the trade.
Past performance is certainly no guarantee of future performance, however if it doesn't work in the past the probability certainly suggests that it is extremely unlikely the strategy will work in the future.
Australian Market Probabilities of Success Extending the analysis of the Australian market to the months of the year uncovers some interesting results.
Different times of the year present different trading opportunities.
April and December provide the best opportunities to trade the market long with a probability of 81% that the market will rise during April, 74% in December and 70% in August.
On the short side, Jun is the obvious stand out with the market only rising 37% of the time during June, so it goes down 63% of the time.
February is also weak with the market lower 52% of the time but losing an average of -0.
02% during the month.
The probabilities definitely favour some months as being better than others when trading Australian shares, but once again this is unlikely to be a complete trading strategy.
It is more likely to be used as the basis or in conjunction with another strategy for entry and exit.
Designing Your Own Trading Strategy When it comes time to choose a trading strategy, there are a few ways you can approach this.
To build your own system is probably the most satisfying and ultimately the best way to approach the market as it allows you to perfectly tailor the strategy to suit your individual trading personality.
However a word of advice, this is not easy.
It takes experience to even know where to start looking and then an enormous amount of time to develop a profitable strategy.
Some of the strategies that I have used I have worked on for many years to get them to a point that I am happy with the results they deliver.