Most traders and nearly all investors prefer to use an approach which is heavily dependent on the use of fundamental data. Stock trading literature is filled with detailed studies of earnings and debt / equity ratios. International investment publications promptly report inflation in Asia or a political turnabout in Europe. Many market participants believe that their portfolio should be under constant revision based on the latest developments to appear in the press. Such practices, common as they may be, are the outcome of a mistaken understanding of what profits and losses are made of.

In the mountain of numbers such as earnings, debts, inflation, interest rates, purchasing power parity, sales growth, and a host of other pieces of economic data, traders often forget about the three most important numbers: the price at which they get into a trade, the price at which they get out, and the size of the transaction they execute. Think about that. If you bought 100 shares at $40 and later sold those shares at $50, you made $1000, less expenses. No matter what corporate earnings or economic data looked like at the time, your trade is strictly a product of three numbers, entry price, exit price and transaction size. With losses, traders become even more blinded to this basic fact. If you buy 100 shares at $90 and later sell at $70, you lose $2000, no matter how good earnings looked, or how much potential the new product line had or how the economic figures appeared. Nevertheless, countless traders will hang onto such a position from $90 to $70 to $50, each time justifying their decision based on fundamental factors. At iSigma, by focusing on these three most important numbers, we are able to achieve serious profits without ever allowing losses to become severe.

Is there any place for news in a trader's toolbox? There is, but it has nothing to do with entry selection or exit timing or position sizing. We let the system take care of those decisions on a trade by trade basis using a sophisticated algorithms and statistical models. It's the human component, the trader using the system signals, that stands to benefit from reading the stories in the news. Staying disciplined is tough, but watching the news stories appear confirming the positions you've been in for weeks or even months helps establish and develop the confidence to stay with the system. Consistency is the key to winning in the markets with iSigma and it is the confidence of the trader that makes consistent, disciplined trading a reality.

There are plenty of good news outlets for market participants, but when we believe a certain news item is particularly unique or interesting, we'll provide a link to it at our home page.