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c06 JWBK182-McDowell April 25, 2008 15:54 Printer: Yet to come

CHAPTER 6

Entry Rules and

Your Trading

System

F

inding the right trading system or approach can be a lengthy process.

It’s a very personal choice, and it truly is like a relationship: There

needs to be a connection and an understanding between you and

your system. You must believe in your system and trust that it can produce

consistent profits over time. Also, you have to understand that no system

is perfect and no system can produce 100 percent winning trades.

If you have a system that isn’t working for you, and your win ratio

and payoff ratio don’t generate a profit over time, then rethink your strat-

egy. Make adjustments to the entries and exits, determine if it is your

system that isn’t working or is it your trading psychology that is off. See

if the market cycle has changed. Maybe you need to adjust to the new

market cycle.

Remember, to constantly jump from one system to another in search

of the “holy grail” won’t get you any closer to profitability if you don’t give

each system a chance to work. The decision to divorce your system should

be a carefully thought out one, and you must be sure that you aren’t merely

afraid of commitment. Divorce of any kind can be emotionally and finan-

cially expensive, so proceed with caution.

FIND A SYSTEM THAT MAKES YOU FEEL

COMFORTABLE AND CONFIDENT

Let’s determine if you currently have a trading system in place. If you do not

have a system, we will identify certain parameters to follow in selecting a

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