December 9


Top 4 Myths of System Trading

By Jeff Swanson

December 9, 2019

So you want to become a successful system trader. That's great! Back in 2006, I had a great idea. I was going to become a day trader and make a bunch of money. So, I did something brilliant. I borrowed $20,000 on credit cards (cash advance) to fund my new endeavor.

Making a bunch of money would be easy! So I thought. How hard can trading be? Buy low and sell high. My mind was swimming with the possibilities once I had all that money. You could make $500 per day, with just an hour or two of work. Then you scale up with more shares to rake in big cash,

The reality was much different than the fantasy picture I had in my head. Each month of my trading was a defeat as I saw more money drain from my trading account. It was disheartening.

Over the years, I've come to see the same naive look in other people's eyes or their writing. Allow me to save you some time and money as I tell you about the four most common myths of system trading and provide you a away to jump-start your trading the right way!

Myth #1: I'm Going To Get Rich Quick!

I hate to burst your bubble but, here is the truth: System trading is not a get-rich gimmick. 

You're not going to take a $10,000 trading account and quit your job next month as a successful day trader. You're not even going to turn the $10,000 starting capital into a $50,000 account in one year. 

I have people contact me and want a system that returns 20% or 30% per year with minimal drawdown. Some ask me for even more amazing returns per year. Surely it can be done, right? Well, maybe, but it's the exception, not the norm. Let's be clear about expectations about returns by putting things into perspective.

The S&P has returned on average, 8% per year for the past 80 years. Our job as traders is to do better than that while reducing our exposure and risk.

Managed futures might do around 11% per year. The very best fund managers might do between 11%-20% on any given year. Remember, these are very people backed by technology and money. Consistently producing returns like these people is difficult.

So, keep your profit expectations realistic. Making 11% per year consistently, that's good. At 20% per year consistently, you are rocking it!

Myth #2: Trade A Small Account and Make BIG Returns

Starting with a small trading account is excellent as a new trader. You're going to make mistakes, and you're likely going to lose some of that money. Maybe a lot of it. So, risk a small trading account to learn your trading platform, the computer language, and how strategies function on the live market. Make those mistakes now, on the small account.

However, don't expect to make money to live off from a small account. This small account is your training ground or what I like to say, that's tuition money! Maybe with a $20,000 account, you'll start to pay for your trading expenses such as leasing server space, taking courses, and buying books. You'll need a trading account that consists of hundreds of thousands of dollars to make a living from trading. But do start small until you become profitable. 

Myth #3: Learn To Trade Successfully In A Short Time

Don't expect to become professional in the next month or two. Like anything worth pursuing in life, it's going to take time. Your journey from newbie to successful system trader is likely to take years. It's going to take much work as well. Do you have the time? Do you have the will? You're going to find out!

Becoming successful will not necessarily come easy. Between the psychological issues that can haunt traders to the technical know-how required, you have some work ahead of you.

Think of it this way, if you want to get paid well for anything in life, such as being a neurosurgeon or top athlete, you don't suddenly become those people on a whim. You have to earn it through learning your craft and practicing your craft every day. You become a successful trader after first failing as an average trader and then moving up.

Myth #4: You Only Need One Great System

So many people are looking for that one single system that generates a steady stream of cash for them month after month. Well, that's NOT how it works. Trading systems go through phases where they have winning months and then losing months. These losing months are drawdown periods. Sometimes sound systems lose your money for 6 months or longer! How to survive this?

You need to create a portfolio of trading systems. We've all seen the graphs from financial advisors where they show you a pie chart. This pie chart breaks down your investment portfolio divided between large-cap stocks, small-cap stocks, international stocks, U.S. bonds, and a gold ETF. This approche is designed to help smooth out your equity curve in your investment account. In other words, lessen the impact of those drawdowns. In short, when you have uncorrelated assets in your portfolio, you make your overall equity curve smoother.

Well, you need to create a portfolio like that for your trading. You need a portfolio of trading systems. The goal is to diversify your portfolio across uncorrelated markets, different trading styles, and even different timeframes. Doing this reduces those drawdowns, and you're much more likely to bring in a consistent profit every month. You'll still go through periods where you're making a lot of cash and other periods where your portfolio is not doing as well. But overall, you're in much better shape.


There are no shortcuts to reaching your goals as a system trader. However, you can speed up the process by acquiring the right information and skillsets. Doing this is Your opportunity to have someone show you how to the puzzle of system trading works, without having to figure it all out by yourself.

If you're an aspiring system trader who wants to achieve success as quickly as possible, System Development Master Class is for you. This course is an educational experience designed to show you the specific skills needed to become profitable. If you genuinely want to improve your trading, it's the most valuable investment in yourself that you could make.

Jeff Swanson

About the author

Jeff has built and traded automated trading systems for the futures markets since 2008. He is the creator of the online courses System Development Master Class and Alpha Compass. Jeff is also the founder of EasyLanguage Mastery - a website and mission to empower the EasyLanguage trader with the proper knowledge and tools to become a profitable trader.

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