To become a successful trader you must have some kind of method or system to follow that will keep you on track. You may be buying and selling on tips, the weather or phases of the moon (there is a system like that).

The two basic methods are based either on fundamental or technicals. In stock the fundamentals take into account sales, gross profit margins, net profit margins, industry growth, management capabilities, price/earning ratios, etc. In technical analysis you would be computing various moving averages (such as 200-day, 50-day 10-day) of the stock price, trend lines, Fibonacci retracement, support and resistance levels, Elliott Waves, stochastics and many others.

There are scores of systems for sale and you can pick and choose among them to see which one suits your bank account and personality. Your choices will range from long-term to day trading. One thing for sure dont buy any system that does not have a good exit strategy. Understand that many systems will trade frequently with small losses, but any method must have a won/lost ratio of 3 to 1 to be profitable. That means over the period of one year you must win $3 for every $1 trading loss. You will learn early in the game to love small losses. Never buy any system that allows big losses.

There is a magazine published every other month called Futures Truth that prints the trading record for about 200 commodity systems. A great way to find the best systems without losing your money.

Most of the systems you find will be based upon some kind of strict mechanical entry and exit computation and will need computer software that you will receive when you purchase it. The software vendor may even provide you with a broker who specializes in trading their method.

The reason many of these mechanical systems do not have a better ROI (return on investment) better called ROS (return on speculation) is computer systems adhere to a strict formula for their BUY/SELL signals. They cannot give you a maybe because computers dont understand maybe. There is no subjective influence at all. The latter will have both positive and negative results on your returns. Most people dont want any subjectivity and prefer to follow what the computer spits out whether right or wrong; it relieves the trader of the responsibility of the decisions.

There are many professional traders I knew when I was an exchange member who traded strictly on feel and I know many who made six figure incomes doing it.

Many people start with a professional system and will tweak it to better fit their personality. This is very common, but requires personal discipline to remain with those alterations. You cant be changing all the time.

Whether for stocks, funds, commodities or whatever you invest you must have an organized trading system that has a good exit strategy. Whatever you buy it is the exit method that will help you keep the profits you make. To be a successful investor you must have a system.

Al Thomas

Albert W. Thomas has spent most of his life in the field of finance. In 1965 he founded an insurance holding company, Security Dynamics Investment Corporation, after having been an agent and General Agent for several life insurance companies. In 1970 he became cofounder and president of Real Life Estate, Inc., that marketed a unique real estate and life insurance package.

After he became interested in commodities he bought a seat for his personal trading on the Chicago Open Board of Trade, which is now known as the MidAmerica Commodity Exchange. Later he became a full time trader and also acted as a commodity broker for a few select clients. By fellow floor traders Al is considered to be an excellent technical analyst much of which is outlined in his book IF IT DOESN'T GO UP, DON'T BUY IT! It became a best seller on Amazon.

In 1981 he sold his membership on the Exchange and with his wife, Carolyn, lived full time aboard their 41' ketch, the Aumakua (which means guardian angel in Hawaiian). They sailed in Florida and the Bahamas for two years.

He founded World Trading Group in 1984 that grew to the seventh largest introducing commodity brokerage firm in the U.S. with 35 offices from coast to coast, Alaska and Canada. It was sold in 1992.

Al is a graduate of Northwestern University with a B.S. degree in Commerce and is a member of MENSA. He is now president of Williamsburg Investment Company that syndicates his weekly financial column since 1999 to more than 300 newspapers and writes a financial market letter called Over My Shoulder that is quoted in Barron?s and many other publications. A 3-month trial subscription is available on his web site. He is a regular guest on several financial radio talk shows.

His favorite pastime is fishing.

Mr. Thomas is available for speaking engagements. Please call 321-453-5300 for more information.