Laurens Bensdorp

The following is adapted from  Automated Stock Trading Systems  by Laurens Bensdorp. As a trader, you may make some profit and start to feel pretty good about your strategy. Then the profit stalls or you experience a long drawdown, or you hear from a friend who is doing even better, and doubt creeps in: Do you  really  know what you’re doing? Is your strategy working? That doubt will infect your decisions. Where before you executed trades without hesitation, you’ll begin to second-guess. Though your strategy could very well be working, you’ll start to abandon it at key moments. Trading is a long-haul game, and consistency is key. To succeed, you must be able to trust your strategy and execute it with confidence. By comparing your results to a benchmark, you can evaluate the effectiveness of your trading system and either build confidence or identify a need for improvement. Let’s look at two different benchmarks you should strive to beat with your tradi...

The following is adapted form  Automated Stock Trading Systems . When I ask anyone who wants to invest what their objective is, the first answer they all give is, “I want to make as much money as possible with the lowest risk possible.” That’s what everybody wants, and frankly, it’s a terrible answer. It’s vague and impossible to measure. Plus, everyone has a different idea of what constitutes risk. Entering stock trading with an objective like that is like taking a road trip without a map. Your objectives are a GPS that will guide your strategy and decisions as a trader. The more specific and clear you are, the better. In order to attain your personal vision of success as a trader, define your objectives in the following eight categories. #1: Personal Objectives Defining your personal objectives as a trader means answering questions around how you would define your perfect life as a trader, looking at your personal situation and asking what you really want. Wh...

The following is adapted from Automated Stock Trading Systems. Let’s say there’s a roulette wheel with only red and black pockets and a payout of 1.2: 1. If you bet $10 on red and it lands on red, you make $12, but if it lands on black, you lose your $10. If you instead bet $10 on  both  red and black, then no matter where the ball lands, red or black, you will make $2, as you will lose $10 on one bet and gain $12 on the other. Obviously, casinos don’t set the odds up this way, but this is a simplistic representation of what can happen when you use multiple systems of trading. Most traders I know spend far too much time filled with anxiety, worried that the market is going to turn and they’ll lose big. By utilizing multiple noncorrelated systems, you don’t have to worry about market changes, because you can make money in bull, bear, and sideways markets alike. For this strategy to work, you must avoid falling into the trap of your systems replicating each other’s ...

Your automated trading strategy does not benefit from adrenaline.  In fact, if you’re pumped up about something the only thing you can do is screw up your strategy.  That’s because adrenaline puts your brain into ‘fight or flight’ mode, which is great when you’re fighting a wild animal on the savannah or running from a burning building, but really bad when you’re looking at historical price action. So here’s a crucial rule all successful traders follow:   Don’t trade at all on days in which there are no ‘low-risk’ trades available. Many new traders think they’ve got to trade all day, every day.  This is a huge mistake .  Trading when you don’t have a low-risk (think high probability), trade will only lead to big losses.   It’s perfectly fine to ‘sit out’ a day and do nothing at all.  Remember that most days have very little price movement.   If you go hunting after a trade when the odds are against you, you’re no longe...

I’m sure you’ve kept an eye on the markets recently, and perhaps more so than normal.  It’s hard to open a newspaper, turn on the TV or go online without seeing breathless reporters exclaiming about “the biggest day ever” or “the worst day ever” or “a rare circuit breaker”, things none of them really understand. Or maybe they  do  understand, and they just don’t care.  Maybe they know  exactly  what’s going on, and they’re just junkies, like the kind who ride roller coasters or bungee-jump off bridges for thrills.  They’re addicted to the ‘high’ of being a part of something exciting and complicated that millions of people trust them to explain. You might be thinking I’m harsh, but have you heard anyone tell you that the market is currently trading where it was back in December of 2017?  That’s right...more than two years of volatility and ups and downs and you’re back to where you were, less all of the fees, account charges and taxes....

I love sharing what I’ve learned over the last 20 years, but sometimes it’s frustrating. You see, I’ve discovered that just giving someone the knowledge they need isn’t enough; they have to have the discipline to follow the rules. For example, a lot of traders lack the discipline to subordinate their emotions to the rules.  They understand intellectual the ‘why’ and the ‘how’, but they lack the ability to stay out of the way.  They buy too early or too late or not at all, or they sell too early or too late or not at all.   They’re really gamblers, not traders, because the gambler is in it for the thrill that comes from participating in the event in a financially meaningful way. Other traders have no problem following the rules, but they’re ‘married’ to a single strategy.  They’re all in on that one strategy as if it was a divinely revealed commandment.   They follow it wherever it leads them...often to ruin.   Successful traders utili...