and SYSTEM DEVELOPMENT
K. Tharp, Ph.D.
research suggests that the problems people have in developing a
trading system fall into five different categories.
first three areas prevent traders from ever starting (or finishing)
the development of a trading system. These include
computer/technology phobia, procrastination, and being overwhelmed
by the whole process. The last two problems tend to prevent the
trader from coming up with a workable system. These include
perfectionism and judgmental biases in your thinking.
I’d like to focus on procrastination which is big hindrance
for many system developers.
many of us have a hard time getting started—especially when it
comes to the task of developing a workable trading system. Yet
postponing the task creates even more problems.
is behind procrastination problems of this sort? Often, a major
cause is the fear of failure, especially since the result of
completing the task is an opportunity to play a risky game like
trading. For example, if you’ve tried trading without a plan, you
know how risky it is and part of you may be so afraid of the
consequences of trading that you are having difficulty starting to
develop the plan. Or, perhaps you’ve quit your job to start
trading full time, but you’re so afraid of the possibility of not
trading well that you cannot complete your
you’re uncertain of your ability to perform, either based on past
experience or a general lack of self-confidence, you’ll probably
find it difficult to begin. And the
greater your time pressure to perform, the more fear you will
the fear of success will produce the same result. People fear success
because it will bring something new. Suppose you become “rich”
and, based on your experience, you don’t like all the implications
of what it means to be “rich.”
your friends will no longer want to be associated with you or
perhaps they’ll try to take advantage of you when you have more
than they do. Or perhaps you think wealthy people are stingy and
narrow-minded. You think "I don’t want to become
reason you might procrastinate about developing a trading system is
lack of interest in that portion of the task. You don’t like the
idea of playing around with computers, testing numbers, and doing
all of the work. Maybe it reminds you too much of school. Lack of
interest, like a fast growing weed sending out roots in all
directions, can strangle motivation and make it impossible to even
start a simple task. All you wanted to do is get about the business
of trading. As a result, you just trade, but you have never tested
what you are trading. You just prefer to make mistakes the hard way.
the work involved in developing a trading system reminds you of
someone you do not like. Someone you dislike told you to do it and
you feel resentment—or perhaps someone you dislike always used to
do things like develop trading systems. You don’t want to be like
that person, even though you know you have to do the work, so you
tend to put it off.
more you dislike the idea of developing a trading system, or even
doing certain parts of the task, the more you will tend to push it
away. This means you’ll leave the toughest part of the job for
that portion of the day when your energy is lowest, and you are likely
to make a lot of mistakes.
the most important part of developing a trading system is to develop
the objectives for the system. Once you have the objectives down,
then the task of developing a system really is fairly simple.
Getting your objectives down is 50% of the task.
Until you have your objectives written down, you have no way
of knowing what you want or of knowing when you’ve got it. How can
you even monitor your progress, a major factor in ongoing
procrastination, until you know exactly what you want? In contrast,
once you know what you want, you can set deadlines for each phase of
to overcome procrastination.
you must realize that procrastination comes from you and take
control of the situation. Make a commitment to get the job
done. Also concentrate your focus on starting the project (or
the next phase) rather than finishing it.
Next, write down all
of your objectives for your trading system. At this point, you
should know what you want, the tasks involved in producing it, and
standards you will have for knowing when each part of the task is
complete. When you know what has to be done next, it’s much easier
to concentrate on doing it.
divide the task of developing a trading system into steps. Rank the
steps in terms of priority and then in terms of your desire to do
deadlines for completing each step and announce those deadlines to
the world. If you find that one portion of the job is
particularly onerous, then break it into subtasks and give yourself
a deadline for each subtask.
begin the next step. Concentrate on taking each step and then
that Lao Tse, the great Taoist teacher, once said, “A journey
of a 1000 miles begins with a single footstep.”
About the Author: Trading
Coach Dr. Van K. Tharp, is widely recognized for his best-selling
book Trade Your Way to Financial Freedom and his classic Peak
Performance Home Study Course for traders and investors. Visit
him at www.iitm.com for a FREE
trading game or to sign up for his FREE weekly newsletter.