The question of the "Best Trading System" has become most challenging for many traders. In the period when the various trading platforms, charting solutions, online interactive brokerage services, bulk of the stock market data and news become available to anyone this question has turned into "How to adjust a trading system to fit my personal needs?".
The "Best Trading System" is the system that best fits a trader's personal trading style, chosen trading vehicle and personal risk tolerance.
Different trading vehicles require utilizing different trading systems. No matter how good the trading system is for trading stocks, this system could be total failure in applying to the options or futures markets. There is no need to consider the time factor that affects options and futures price for stock trading system. The stock trading system may hold position for several months, while holding an option position opened for more then a month could be suicidal for an options portfolio. At the same time not all of the options trading systems could be applied to trade uncovered options. The time factor for an option trader is a key factor to close a position while an uncovered options trader may use the time factor as a main strategy to hold the position in order to receive a more profitable trade.
As we see it would be wrong to apply the one "Best Trading System" to all markets. The different markets require using different trading systems and different trading strategies. We could have a totally opposite trading system that would best perform in stock, options, futures and currency markets respectively and the "Best Trading System" is the system that best fits the selected trading vehicle.
Each trader has a personal trading style that is mainly defined by the portfolio size, selected money management strategy and chosen trading vehicle. A trader who has $100,000 portfolio may select to invest only 10% of the portfolio into a single trade, while a trader whose portfolio is below $2,000 may be willing to invest into a trade an entire portfolio plus margin. The first trader may diversify the portfolio by buying different stocks while the second trader most likely could work with one stock only.
Brokerage commissions affect personal trading styles as well. By investing $1,000 into a single trade a trader has to receive at least 3% profit to cover just commission fees only. At the same time by investing $10,000 into a trade, only 0.3% is needed to cover commissions and with a 3% raise a trader would pocket 2.7% of clean profit.
Another factor that affects trading styles is margin trading. Many of the traders are bounded by margin requirements and they have to count on the margin calls. As we see each trader is unique in their way of the managing an investment portfolio and a trading style.
Many traders make similar mistakes by applying the $100,000 portfolio trading system to the small portfolio. After several losses they start to think that it was not the "Best Trading System" without understanding that is not the system failure but their own failure of utilizing the system. It would be logical to adjust a trading system to the personal trading style and it's not always possible to do it. For instance if the trading system is built on a 1% trades, then it would be recommended to invest at least $5,000 into each trade and in this case, it simply will not work with a $1,000 portfolio. In this case the "Best Trading System†is the system that best fits a personal trading style.
There are a lot of factors that define the "Best Trading System". What is the best for one trader is not always the best choice for another trader. Some of the traders consider trading as a full time job by trading during the market open hours and some of the traders can make a trading decision after the market closes only. Some of the traders invest in futures that are traded almost 24 hours a day and some of the traders use Rydex funds that could be traded only once a day. Some of the traders are ok with 20% loss and some of the traders become desperate with 0.5% loosing position. The "Best Trading System" is the system that best fits to the selected trading vehicle, personal trading style and risk tolerance. Every trader would have his own "Best Trading System". You may find numerous trading systems already developed by professionals and still, each of them has to be adjusted in order to become the best for you.