Devising a share trading system

In spite of the commonly held misconception that successful share traders are usually gung-ho mavericks with a talent for picking a good deal, almost all successful day traders actually depend on a good share trading system.

Put simply, a share trading system is a strategy; it is a set of rules that you base all actions on regardless of how the market is performing.

The real advantage to using a quality share trading system is that it forces you to make stock market decisions based on proven market patterns, and not on emotions.

In a sense, having a system is about taking the guesswork out of trading and using history and rules to advantage.

There are five elements to a normal share trading system.Style – this is where you define your share trading objective.

Entry – these are the conditions that must be present for you to trade a certain stock.

Risk – these are the rules that you have in place to limit any losses.

Exit – your strategy for getting out of a stock.

Testing – checking that your strategy works before using real money on it.