2008-06-10: Finding the formula - putting the odds to success in your favour
There are few doubts that fundamentals are the ultimate factors determining price. Nevertheless, a need for the objective, systematic approach appears to boost. An increasingly complex energy market, characterized by large price swings, seems to call out for new tools.

Market experience will always be the most important aspect when it comes to trading success. No matter what approach you choose in trading the energy markets, the outcome is a product of your skills and action. Nevertheless, a thorough valuation of your trading tools may turn out to be time well spent.

To trade the energy complex, the technical approach shows encouraging results. For many a player, the same is true of the fundamental approach. What suits one trader may not suit the other. There are many points to take into consideration in the attempt of finding the best tool for achieving success.

As the attitudes and expectations of the players change, the market moves in trends.
These patterns seem to recur and an understanding of historical relations between certain price averages and indicators can be used to identify turning points. This approach is by no means faultless, but an objective use of the principles of technical analysis can put the odds of success in favour of the trader who embraces this concept.

Once you have decided to implement a systematic approach to your trading, the question of which system to apply shows up. There are certain vital elements that need to be present to ensure profitable trading.

Specific entry and exit indicators are necessary. These are rules for entering and exiting trades. These should be as mechanical and exact as possible, minimizing subjective interpretation or deliberation of validity.

Money management is crucial. In order to win over time, the system must have a way to limit losses. A maximum permissive dollar loss should be operative at any trade. When the stop loss level is reached, cut the loss short and wait for the next opportunity. Systems ebb and flow. Sometimes they make profits and sometimes they are in periods of drawdown. Rather than trading the same amounts of any time, traders can benefit from a system that dictates when to increase and decrease positions. This is were the account is made!

The system should trade both sides of the market, short and long. The structure must also do well in various types of market, trending as well as ranging markets.

To decide whether to use a technical or fundamental trading approach may be difficult. However, the existing market conditions may guide you in finding the best method to enhance your performance. A historically tested system gives you the opportunity to trade with greater confidence - knowing that strategies built on market experience and tradition reward you with positive returns over time.