Most Traders Fail Because They Never Define Their Target.
Successful investors succeed because they choose a system that they feel comfortable with, not one that claims to be the cutting edge. A cool, disciplined trader will make money with an 'average' system, while a nervous, arbitrary trader will annihilate a 'brilliant' system.
The key is to develop a methodology that maximises your strengths and minimises your weaknesses. But how do you do that? Firstly, you must define your objectives.
Can you answer these questions?
How much time do you have to spend trading? It might be full time, part time or hardly any time.
How much capital do you have to work with? Remember, you shouldn't trade money you're not comfortable losing.
How much risk are you comfortable with? The fact is, there will be times when you lose money – in trading this is called your drawdown. You need to know how much of drawdown you are comfortable with? 20%? 30%? You need to decide.
What annual rate of return do you want? This includes what you expect to make and in what timeframe. Be realistic about this. Decide what you honestly think will be returned, based on what you're willing to risk. For example, you're not going to have a system that will return 100% per year if you're only prepared to risk a drawdown of 5%.
How do you want to take your money from the market? Are you looking for cash flow (consistently taking profits out of the market) or capital growth (looking to grow your capital in the market over time, using the magic of compounding)?