Building a money machine - Part 1

This is a start of a serious of blog posts that will walk through the requirements for building a successful money machine. The outcome will be a clear understanding regarding what are the ingrediants for such a tool. It will be an exercise to the readers to find the individual answers and decide whether to build their own tools.

First of, I would like to point you to my earlier posts The philosophy of a Trade Machine and The Money Machine exists!!!.

Except for the technical ability to automatically transmit buy and sell orders, the first obstacle that we have to overcome is to define the trading strategy which is based on the following key questions:

[1] Which market are we trading? (Equities, Futures, Forex, ...)

[2] What kind of time frame do we intend to use in our trades? (Intraday such as a Day trader, 3-5 days holding limits such as a Microtrend trader, or maybe 10-14 (or more) days holding such as a position trader)

- The timeframe defines the buy/sell possibilities strategy.
- The decision which timeframe to use is individual. It vary based on self psychology, knowledge and initial available capital for trading.

Next, we have to decide which stock market are we trading? The market decision should fit to the timeframe in which we are intending to trade. For example, if we are willing to daytrade, the market we choose must be of a high volume, otherwise we won't have the ability to trade on small fractions which is a must in daytrading.
For example the Forex/Currency market is a good candidate for day trading since it has high volumes and the trade spans are very close.

Next, we have to:

[1] Decide where we are trading (using a brokerage firm, trading system, direct access to ECN, ...)
[2] Build the system that executes our trading strategy.

The decision where to trade should fit of course to our earlier decision regarding the market and the timeframe. It should also fit to our tools that will execute the strategy, for exmaple, if we are willing to use an off-the-shelf tool that helps us to execute the strategy, the tool should have an access for using the trading network, or be part of it.

In my next posts I will talk about these two elements of the plan. What question should you ask for the decision where to trade, and how to build a "system" and what is it anyway.