Methodology—What’s in a Word?

In the trading industry, the word ‘methodology’ is used often. Do you have a reliable system for getting the trading results you want? If so, do you follow it religiously? Learn why this is so important for consistently getting the results you want

Before going further, we should ‘drill down’ and really understand what it means, both its ramifications and implications.

Methodology, according to our friend Daniel Webster, “is a set or system of methods, principles and rules for regulating a given discipline, as in the arts or sciences.” OK, now that we have the primary definition let’s see how that applies to trading and the trading industry’s use of the word. Well, first of all it, in our opinion, means a single or sole focus; a “set or system of methods, principles and rules (all plural) for regulating (not directing) a given discipline.” In other words, a PROCESS—not a program, not a system (singular) nor a single way of doing.

‘Trading methodologies’ are conceptually designed to support the trader in trading based on WHO they are, WHAT they want to achieve, WHY, WHEN, WHERE and HOW they trade. The most effective trading methodologies are neither magic nor complicated. In fact, they’re usually very straight-forward and simple. They’ve been added to, deleted from, and restructured over the years to bring them to their current state. You know ‘it’ works, while at the same time, you know when it doesn’t, and why it was most likely you that didn’t work when your methodology didn’t work. However, it doesn’t help you as much as it helped you help yourselves in becoming a better traders, and that is as it should be.

In our opinion, the role of a trading educator is really about helping you become a successful trader—not that of ‘teaching’ you how to trade. It’s about facilitating your understanding the importance of acting (trading) in accordance with your own core values, beliefs, vision, mission and trading methodology. And, we believe, an educators express purpose is to help their students bring out the answers that are inside them so they can make the most effective choices concerning their trading by learning HOW, not WHAT, to think.

Why? Because trading, and especially successful trading, is an unending series of decisions and choices. Decisions and choices such as, what to buy or sell, when to enter or exit, where to place stops, who’s input and ideas to trust, and how to ‘read’ certain chart patterns. These, and the countless other choices a trader must make, are the basis of trading— trading as a vocation or as an avocation.

Furthermore, trading, when done ‘correctly’ and according to your owned trading methodology, can be highly rewarding. Trading begins with you and the knowledge you possess about yourself.

A friend of ours and very successful trader once said that trading is like the words of an old song “everybody wants to go to heaven, but nobody wants to die with the correlation for traders being “everybody wants the big bucks, but nobody wants to pay.” He went on to say “You cannot join the ranks of successful day traders without paying, either up front by investing time, energy, and money to learn the proven principles of trading and develop your own methodology (which we consider to be preferable), or purchase the knowledge of someone who has spent the time, energy, and money to develop one.”

Finally, in our experience, there is no one best trading methodology and the responsibility for discovering which trading methodology is the ‘right fit’ for you rests totally on your shoulders.

Until next time . . .