How Do I Develop a Strategy?

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Developing a Strategy
There is an almost infinite number of strategies that can be implemented.
Each strategy is designed based on:
Time Frame(s)
Market(s)
Vehicle(s)
Tool(s)
Position Type(s)
Trying Something New
New investors and traders should start with one, or perhaps two strategies.
It is better to become an expert on a few strategies rather than knowing a little about many strategies.
Even those with market experience may need to look at adding new strategies or modifying existing strategies.
Don’t be afraid to experiment, try new things, and/or consider “what-if” scenarios when developing a strategy.
A Word of Caution
It is easy to want to make the Financial Markets appear “black and white.”
This can be dangerous. A healthy respect is always needed.
The markets are almost always gray. There will always be warning signs that can appear to contradict the desired outcome from happening.
At any moment, it is necessary to consider:
1. What happens if the SPX goes up?
2. What happens if the SPX goes down?
3. What happens if the SPX goes sideways?
Second Guessing
There is plenty of room for “woulda, coulda, shoulda” when participating in the financial markets.
As much as possible, try to avoid this.
The main idea is to learn from each trade, both winners and losers.
Keep the things that work while modifying or discarding things that don’t.
Developing a strategy is a very personal thing.
Time Frames
Day-Trader
Trades last a few minutes to a few hours.
All positions are exited by the end of the trading day.
Swing-Trader
Short-Term investments lasting days, weeks to months.
Can involve going long and short.
Investor
Long-term positions held for months to years.
The SPX Investing Program endorses implementing strategies on all time-frames but highly recommends NOT Day-Trading.
Markets
Specific Markets
Stocks? Bonds? Options? Futures? Gold? Currencies, Cryptocurrencies?
Stocks
Individual stocks?
Options
Hedging?
Capital Gains?
Income?
Indexes
SPX? DIA? NDX?
ETFs
SPY & Sector ETFs?
Other ETFs?
Mutual Funds
The SPX Investing Program teaches strategies using ETFs, Mutual Funds, and Options.
Tools
Tools used to make decisions:
Charting software
Think or Swim (TOS)
TastyWorks Platform
Websites:
StockCharts.com ($)
Sentimentrader.com ($)
Bloomberg.com
Stratfor.com ($)
WSJ.com ($)
Yahoo and Google Financial websites, Investing.com
The SPX Investing Program
Daily/Weekly Video Updates ($)
An updated list of useful tools is maintained at spxinvesting.com
Positions
Long
Up
Short
Down
Both
Up and down
Strategy Rules
Each Strategy should have three basic rules:
1. Rules for entering
2. Rules for keeping a position open
3. Rules for closing a position.
Testing
Any strategy should be tested before being put into action.
This can involve:
Research & Development
Back-testing
Forward-testing
Virtual-Trading/ Software