Must Follow the System

An email in from a client worth sharing:

“Suppose I am using daily signals and trading daily (when signal are generated), but have to travel and don’t have regular internet access for a period of time (e.g. about a week). Should I close out all positions before the trip and resume trading after?”

If you don’t follow the system, it’s no longer a system. I don’t have any advice for starting/stopping/starting trading…on a discretionary basis!

6 thoughts on “Must Follow the System

  1. I don’t think Nick Darvas had the internet back in his day and he traded all over the world.

  2. It’s about developing a system that will work in a way that allows you to leave it for a week – Rob above pointed out how Darvas’ system allowed him to travel all over the world using stops to take him out of positions.

    In this day and age though you should be able to automate your system using something like Trade Station. If you cannot automate it, I would take this as a red flag that your system is flawed!!

  3. It’s about setting an ATR stop on each of your positions before you travel, if any of them trades below the ATR stop, it will sell automatically.
    By the way, you don’t need to travel to set an ATR stop!!

  4. Henry i think leaps are the best thing now. I have out-of the money bull spreads on a lot of stocks that i like now. Mostly Tech

  5. Please let me disagree a bit here.

    I would say that any system, any day you should be able to sell all positions and resume trading a few days later. After all, return curves are not built in one or two trades or days. Of course, you are taking a chance that you might miss a big up, say 2 to 3 ATRs worth of gain. that is all.

    Alternatively, in agreement with the spirit of trend following, I would suggest, you could sell, if you are seeing a loss, and hold if you are seeing a profit and then go on your vacation if that would let you relax and enjoy better. There is nothing wrong there.

    The trend following greats emphasize that you should not skip any signal just to let you understand that
    the entries that sound very hard to take, could be profitable and vice versa.

    Another reason they emphasize that is that once you sell (or buy) outside the system,
    you dont have the framework to get back in (or out).

    Outside of these reasons, it is dogmatic to think that you should take every signal slavishly. This attitude creates fear and drama.

    Until one understands trend following as a meaningful thing to do, no matter what systems you come up with and what disciplines you try to hold onto, cannot help.

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