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How can you Improve your Trading?

By Fizz on my Jayce | Fizz on my Jayce | 27 Nov 2021

Hello everyone, today I will discuss three things that can level up your trading, get better results and most importantly, get that consistency in trading that is very difficult to achieve.

Make your Trading Fully Systematic

The first thing that can help you to improve your trading and start seeing consistent results is to make your trading fully systematic. Systematic trading means that you follow an explicit set of rules and do not use your own discretion when trading. Using your own discretion or subjectivity when trading is almost guaranteed to lead to mistakes due to human error and to inconsistency. When you have a fully systematic trading strategy then you simply follow its signals without any subjectivity, which eliminates a lot of errors. A huge positive of fully systematic trading systems is that you can code them and free up your time by not having to find the trading signals manually. You can code the systematic systems either fully or partly. Fully systematic trading, therefore, provides a benefit of low time requirements and so it can be easily done alongside other commitments, such as full-time job.

Start Thinking on a Portfolio Level


Number two thing to improve your trading is to start thinking on a portfolio level rather than a single strategy level. No single trading strategy is going to work in all market conditions – trading really isn’t that simple. Different trading system types capitalize on different market forces, and will therefore vary in their performance. Slower-paced trend-following stock trading systems will perform well during times of lower volatility when the stock market is just slowly moving higher and higher. On the other hand, systems that capitalize on mean reversion in stocks will typically perform better during times of higher volatility, which is when the trend-following systems suffer. The danger here is that one can easily slip into the trap of trying to make their strategy too complex by introducing additional rules or filters with a view of making the strategy profitable in all market environments. This is, in my experience, not the right way to go – naturally, you want to ensure that your strategy is good enough and so trying to improve it is generally OK, however you need to be beware that there’s a fine line in between improving the strategy and making it unnecessarily complex, to the point where it becomes over-optimized. One thing that you can truly level up your trading with is the mindset shift of not trying to look for a perfect strategy, but rather combining decent enough strategies into a portfolio. So – instead of trading a single strategy, you look for additional systems or systems that complement the one you’ve already got.

Understand Relationship between Risk and Return in Trading


And finally, number three thing to improve your trading is to make sure that you understand the risk and more specifically, the relationship between risk and return in trading in general. There’s a phrase “there is no free lunch”, that you may have come across before and when it comes to trading the financial markets, it’s 100% true. What it means is that typically, when you increase the return potential of a trading system by making it more aggressive or by trading highly leveraged products, the risk increases as well. For example – I recently saw a system that generated 105% profit in a single month in its backtest. That is certainly very appealing, however, the return is only one side of the equation – the risk is the other. In this particular strategy, the risk is huge, as it turns out that the strategy could potentially get into a 60% drawdown which is very dangerous. The point here is that you need to understand that as you increase the return, you increase your risk in the vast majority of cases as well, and in order to provide yourself with a chance of making it, you need to figure out how much risk can you tolerate and work around that accordingly. When it comes to myself, I’m generally quite conservative and so I would not trade this particular strategy myself.

Hope you found today’s article helpful.

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Fizz on my Jayce
Fizz on my Jayce

Crypto trader & Investor. I show my opinions, trading tips, and nothing is financial advice.

Fizz on my Jayce
Fizz on my Jayce

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