Model Trading Systems

I consider myself to be a modeler of trading excellence, and as a modeler, I use neuro-linguistic programming to determine how to duplicate trading excellence. To do this, you first have to decide exactly what it is that you want to model.

Next, you need to find a number of people who do what you want to model very well. And last, you need to find the tasks they do to produce that excellence and the ingredients they use to do those tasks with excellence, which are the important beliefs, mental states and strategies.

Early in my career as a modeler and trading coach, I did workshops with two Market Wizard traders, Ed Seykota and Tom Basso. Both agreed that trading success was about 10% systems; 30% money management (or what I call position-sizing); and 60% psychology. I'd already spent a lot of effort in modeling the psychology of trading and position-sizing, so my final task was to look at the part of trading that seemed to be the most technical: System development. Trade Your Way to Financial Freedom was written to be a summary of my research in this area and its purpose was to teach people how to develop a system that would fit them.

In my modeling work, I've come to two important conclusions. ...