The trading loop



As an independent trader, you are solely responsible for your actions. Trading can be seen as one sequence of interdependent and linked procedures. There are three major procedures that constitute the basics of any trade.

  • Stock Selection
  • Risk Management
  • Trading (itself)

It is your job to master each one of them and understand their connections. Like a piece of gear, if a part is broken or damaged the whole system could be affected. A well-oiled engine will run smoothly, so as a trading system with one well-defined strategy and sound rules. In the beginning you must follow the system blindly until it becomes part of you. Do it n times as practice makes perfection and this is the only way you can become more efficient. Once you dominate one procedure, the nuances will start to arise and some adjustments can be made (fine-tuning will be key). Then you can move to the next step and start doing the same, over and over, and so on… once the cycle ends, by trial and error you will be able to improve the next one, in an iterative way. Looping is the core of trading as you will make not one but dozens, hundreds or even thousands of trades across your career. Each one is different but the framework will basically be the same.

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