Find A Reputable Trading System – 7 Things To Look For
Unless you are an expert stock picker, following a proven trading strategy is probably the fastest and easiest way to profit from the stock market. Unfortunately, that’s not always the case. Some operators don’t honor their guarantees, and some are promoting systems with inflated claims. So how do you find a reputable trading system?
I’ve put together 7 things you should look for in a reputable trading system. Only the best systems (if any) will survive this rigorous screening.
No Bad Reviews
To find a reputable trading system, Google the name of the system. See what pops up. Look for any reviews and see what others are saying.
Returns More Than 33% Annually
Since anyone can just buy and hold an ETF like UPRO and get an average of 3x what the markets do, you goal is to find a system that returns more than that. Example: The markets gain an average of 11% per year. UPRO should do 3x that, or 33% average annual gain. If the system you are looking at, returns less than 33% a year, it’s not worth your time or effort.
Has Transparency
It’s amazing to me how many trading systems out there don’t show their results. To find a reputable trading system, make sure they have complete transparency. You want to be able to see their results BEFORE you signup and you want to be able to verify those results. If the website does not show the trades and/or the returns, I would pass on that system.
Low Risk
Measuring risk in a reputable trading system is easy. First you need to know their average annual gain on the system. Cut that amount in half and that is the maximum amount of drawdown you should be forced to take with that system.
If the website does not show the annual gains of their system, only the trades, then you will need to construct a portfolio and pretend to make their trades. What was your annual gain?
For example, my Index Trading Strategy has averaged 110% annually for the last 7 years. Half of 110 is 55. The maximum drawdown for this system should be 55%.
If you find a system that returns 50% annually, but you saw that at one point in time the system actually went down 55%, then this system is to risky for the return. The maximum drawdown you should be willing to take with this system is 25%.
Time Tested
If you plan to use a certain system for more than a year, make sure it shows gain in good and bad markets. I have found that what works in a Bull market does not work in a Bear market. To find a reputable trading system, look for a system that has been around at least 10 years.
Markets go through Bull markets about once every seven years. Bear markets can last 3 years or more. If a trading system has been around at least 10 years, more than likely it has profited through Bull and Bear markets.
Let’s You Try Risk Free
Make sure the system comes with a 30-Day Money Back Guarantee at a minimum. You want to be able to examine the returns and paper trade the alerts first. If things are not what they say they are, you can cancel and lose nothing.
Easy To Follow And Trade
The trading system you use has to be easy to duplicate with little time required.
By applying the seven rules above, you may have to go thru hundreds of trading strategies to find even one that qualifies. My trading system has meet all rules but one. It has only been around for 8 years instead of the required 10. If that’s not too important to you, you may want to join me.
