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How to develop your own trading system?

Jun 21 at 06:16
48 příspěvků
I've got recently question like this… and I thought that I share my answer to you too so you can inspire…

'I already have a lot of knowledge about the markets. I would like to develop my own trading system. I have been observing repeating patterns on the market for a long time. I am quite successful but I only trade on demo and I don't have the confidence to go live. 

I lack clear rules, which does not allow me to make a decision on live even with micro stakes. I don't have conclusive rules as to what the signal looks like because it could be something different each time based on a lot of analysis. 

I also don't want to buy someone else's trading system, I feel most comfortable with what I work out myself.'

There are many traders who go down the path of developing their own trading system by assembling it from multiple elements. This is ok, a good approach. But here comes the problem of not being sure, not knowing what the signal actually is.

Trading is analysis + decisions. 

There has to be a clear signal. You have to think about how to get a signal - what conditions have to be met, where, when and what tools will you use to verify it?

Lack of signal means uncertainty and risk. With small positions you wont feel it, but to lose 2% with an account of half a million dollars is getting impressive. Mathematically there may be no difference, but for the psyche it is colossal. There will be, among others, a very serious problem of a glass ceiling.

So what should your system signal look like to make sure you can confidently enter the market with it? 

Create a picture of the signal for yourself - define exactly what it is, what you are willing to bet big money on. Write down the rules, prepare plenty of examples. Work out 1–2 signals, max 3, and let it be something simple, something that leaves no doubt. Start testing on a demo, prove to yourself that it works and that you are able to make money with it.

If you don't have a described system and in addition it's more complicated, you have many things to analyze with different tools, then at some point you won't be able to make a decision. 

You won't be sure that all this great analysis is correct. Something that was supposed to increase probability works the opposite way. The decision-making process in such situation lies and uncertainty arises.

Another thing - learning such a trading system is very long, many years even with a mentor.

Remember - you are never in control of the market. The only thing you have is control over the system. The simpler the better. Intuitive analysis is not a solution for success in trading. Perfect mastery of a system is.
Huge Changes, New Ideas & Decline Of Traditional Investing
Jul 20 at 17:43
20 příspěvků
hi. i'm newbie and have the same questions as you're. i think you must find these signals with help of indicators. create your analysis and then find this great signal which you've opened. maybe i'm wrong i don't know.
Seb King (sebking1986)
Aug 17 at 10:50
459 příspěvků
A thing to remember is that you don't have to know everything or apply everything. There is so much information out there that it can be overwhelming sometimes so focus on what speaks to you the loudest and clearest and use that. You might find that your sport buying opportunities more than sells, fine focus on that. There might be a pattern type you spot easier than others, use that. Reduce the friction to finding setups. Make it easier on yourself and then backtest it and forward test it.
If you can't spot the liquidity then you are the liquidity.
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