THE 3 IMPORTANT BENEFITS OF A CORE VERSUS PERIPHERY STRATEGY
As any of you who have been reading this blog for longer than a fortnight know, I am an advocate of having a core strategy that allows you stay in peace, while giving you the maximum potential for profit possible.
For some of you that strategy may involve trading 40 times a day, taking multiple ticks out of the market. For others it may be a consistent method of investing in stocks that exhibit a certain price pattern. And for the chosen few, perhaps it's actively trading the markets while high on prescription drugs with a variety of costume clad woman keeping you company (true story - don't ask for details).
Whatever the strategy may be, once a core strategy is established then and only then are the advantages of a periphery strategy felt. A sound periphery strategy (definition: a strategy you don't rely on for your primary investment gains, but instead rely on to compliment the performance of your core strategy) will allow you to bring in that spinach and macaroni money, while your core strategy is what you rely on for the steak and potatoes.
A sound core strategy paired with a sound periphery strategy should accomplish the following:
1. A solid core strategy will make your periphery strategy that much better due to the fact that you don't *need* the periphery strategy to make your dough. Therefore, you can allow trades that your periphery strategy generates to come to you. There is no rush or need to force a trade. You are, therefore, empowered to only take the best risk/reward opportunities. That is unless you are a mouth breathing, compulsive button pusher. In which case, no strategy will be of benefit.
2. A periphery strategy will allow your core strategy the extra cushion it needs when it goes through its inevitable drawdown periods. As much as we all think we have that one system that is immune to drawdowns, it is inevitable that you, me and the next guy will suffer as a result of one. The magic of a good periphery system is that it allows you to absorb the drawdown by whittling down the pressure, at least somewhat. This will allow you to keep your mind in balance, which is essential when you are getting bombarded, while holding your head and praying that you don't end up going the way of Willy Lump Lump.
3. Psychological comfort. Knowing that have two methods of taking cash out of the market, gives you that much more confidence. Important note here: don't fool yourself into thinking you have two methods that compliment each other well and allow you to profit when you don't. Study your trades carefully, learn from experience...with time, it will all come together. This type of core/periphery strategy involves a lot of trial and error. Nearly 17 years here, and still tweaking it.
The homework never ends. It's when you think it has ended that your troubles are just beginning.
