Rules for trading in the market of financial instruments
Rules for trading in the market of financial instruments
When engaging in any activity, whether it be trading or any other type of business, we must have a clear idea of what needs to be done in order to achieve the desired result.
To understand how to get to the result, in trading, for this, create a trading system or a trading system.
A trading system or a trading system is an action algorithm that determines the order and method of opening positions and fixing them based on an analysis of the market situation, which has a positive long-term financial result.
The trading system should answer the questions:
What market conditions should be in order to open a position and how should they be determined?
How does a position open?
What should be the risk in each individual transaction?
How are goals determined and set and profit recorded?
How can I create my own trading system?
I will try to describe one way that personally helped me create and test my trading system.
This is one of the fundamental principles of creating your own trading system!
Our task is to analyze everything that you can and throw things that do not bring you money! Someone sells one model well, and someone else! Someone loves a short stop, and trading with a short stop is not suitable for other traders. Find what you do best - this is the road to success! And I will try to describe how to do this the easiest way.
How to create a trading system?
Ideally, to understand how to create a trading system, it is advisable for you to have 2 programs:
Transaction journal (it can be a self-written journal, or some kind of software, for example, “MaxProfit”, the online service “Trader Statistics”, “PirateTrade” magazine or others)
Strategy Tester - a program that allows you to emulate trading using historical quotes (AmiBroker, ForexTester, NinjaTrader, TigerTrade)
The algorithm for creating your trading strategy is simple:
We write out all the trading rules known to you.
We sort them by the maximum number of filters. For example: entry by trend, from the mirror level, by the model of “false breakdown”, etc.
We write all received filters to the transaction log
We test the received trading rules for the maximum possible amount of time (preferably at least the last year) for the desired instruments.
We do an analysis of the results and leave in our system only those rules that made a profit in the tested period of time.
Nuances:
It is advisable to exclude the rules that showed during testing the longest periods of drawdowns (a month or more), even if their total for the year is positive. This will allow you not to get into a psychological hole, when some losses lead to others, for traders this condition is called “tilt”.
Try to minimize the number of rules (potential transactions), even to the detriment of potential profit, which will make your trade more relaxed and confident.
What nuances may appear with a detailed analysis:
Some models may work worse in short or long. The price often goes short without local pullbacks and it is better to use any models more aggressively than long entry models.
Not all models and patterns are equally good for all traded instruments. For example, a false breakdown can trade well on all instruments, but trading on a breakdown will certainly not work on all assets.
Not all trading days and trading times are equally good for you. For example, someone trades poorly on Monday and Friday, and best of all, Tuesday and Thursday. All this is also determined with the help of statistics after the accumulation of a certain number of transactions.
Some trading days may be more interesting for sales, and some for purchases.
Models may not work equally well at different levels, for example, a false breakdown model most often occurs and gives a good price move at significant levels, both in growth and in decline.
The final conclusion:
A good trading system is a bad trading system that has been well analyzed and thrown out of it all unnecessary.
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