- Rule #1 – Trade with the Trend.
Trends continue until something happens to change the supply-demand balance. When you trade in the direction of the trend, you are following the markets rather than trying to predict them or fight them.
An automated “trend trading system” defines the trend with a quantitative, mathematical formula. This eliminates the human elements of subjective judgment and emotion in determining the trend of the market.
Automatic signals help the trader make clear and timely decisions in the “heat of battle.”
Another advantage of trend trading systems is that because they are purely mathematical, they can be tested on past market data to evaluate historical performance.
Our trading system is the product of years of scientific research, development, experience and testing. It is not “pattern fit” or “over optimized.”
It uses one formula for all markets. The Spread Trading Secrets system defines the trends and the price levels that will signal a change in trend, giving you precise entry and exit points to trade with the trend, limit losses, and let profits run.
Because the signals are generated automatically, it is easier to follow the cardinal rules for successful trading. Trading with the trend maximises your probability of success because at any given time, the trend is more likely to continue than to change.
Even successful trading methodologies can be frustrating and painful to follow. This is one reason why so many traders are unsuccessful. In trying to avoid the pain of taking losses they hold on to losing positions too long. In trying to avoid the pain of losing back profits on their winning trades, they get out too early and then miss out on the really big moves.
In their attempts to avoid pain, unsuccessful traders ignore the trend and trend changes. They break the first and most important rule for successful trading – Trade with the trend.
Trading with the Spread Trading Secrets system is a simple, end of day process. You won’t need to sit and watch the markets all day. It requires only a few minutes a day to review the daily reports for new signals, then enter your trades.
Enter trades when new trends (UP or DOWN) are signaled and in the direction of the indicated trend.
Trading with the trend can be profitable in both UP and DOWN markets with stocks and futures.
The next two rules both run contrary to human nature. Our natural tendency is to take profits too quickly and to hold on stubbornly to losses. To be a successful trader you must condition yourself to do the exact opposite.
- Rule #2 – Limit losses.
You should always exit a trade when the trend changes, minimising losses.
Successful traders accept losses (and the pain of loss) as an unavoidable part of the long-term trading plan. All trading systems, even the very best, have a large percentage of losing trades. This is why it is so important to limit the size of these losses so that you will still have adequate capital to catch the major trends when they occur.
- Rule #3 – Let profits run.
You should hold trades that are going your way until a trend change is signaled, maximising profits. The trend remains in effect until a change has been signaled, and at any given time the trend is more likely to continue than change. This is really a matter of placing yourself in a position where good things can happen to you. Prices often go far beyond the most “astute” market forecasters’ predictions.
- Rule #4 – Diversify and Balance Positions.
Following this rule will help increase the probability of catching profitable trends while decreasing the impact of losses on any one position.
The goal of this strategy is to improve overall consistency and performance.
Trade both UP and DOWN trends in as many markets as your trading capital will permit, with an approximately equal risk in each market. This will smooth out your overall performance. By “not having all of your eggs in one basket,” you will reduce the magnitude of equity drawdowns in your trading account.
Diversification combined with taking all signals, both long and short, increases your chances of catching the big trends whenever and in whatever market they occur.
No one can predict in advance which markets will have the big moves.
This strategy can be profitable in both “bull” and “bear” markets.
- Rule #5 – Limit Risk and Minimise Costs
You must preserve your trading capital during the losing periods, or you will be out of the markets entirely. Avoiding large individual losses is an important step in maximising your opportunity for trading success.
Greed and fear are the two emotions that you must control to stick to these rules in your trading plan. The higher percentage rate of return you try to achieve, the greater the risk you must take to get it. This is a market reality you can either accept as a fact or choose to learn the hard way.
Trade with realistic expectations of return on capital. Professional money managers using the Spread Trading Secrets system have historical returns ranging from 20% to over 100% per annum.
Don’t over-trade your account. The Spread Trading Secrets System will signal 8 -12 trades per year on average per market. This is a relatively low number of transactions (compared to most other trading systems) and will help you keep the costs of trading down. In addition, you will be taking advantage of a professional trend trading system, without paying any management fees.
If you trade with the Spread Trading Secrets system you will be following the rules for successful trading automatically. This is the simple approach followed by some of the most successful professional stock and futures traders in the industry.
With the Spread Trading Secrets system, you have a complete trading solution that helps you trade with the trend, limit losses, and let profits run.
Applying the simple money management and risk control rules will provide diversification and balance while reducing risk and minimising trading costs.
Using these in combination, you will be following a complete trading strategy that will maximise your probability for trading success.