What is a Trading System?
What is it?
It basically boils down to three words - Entry, Exit and Stop. There's more to it, but minimally it needs these ingredients.
There has to be clear and concrete rules for Entry/Exit and Stop.
Gap rules for Exit - What do you do when the market gaps beyond your Stop. Do you exit immediately at open ? Wait for a 1-min, 5-min etc candle to close and place stop above/below that ? Exit at a fixed ATR beyond the Stop etc.
Gap rules for Entry - If you get signal on the last candle of the trading session and your order does not get filled, and the market gaps open next day. Will you enter immediately ? Will you wait for the for the first 1-min, 5-min etc candle to close and place your buy/sell order above/below that ?
Rules for scaling up, if you pyramid (Don't need to worry about this, if you go all in)
Rules for scaling out -When do you take partial profits? Is the exit for fixed points ? Is the exit based on Risk/Reward ? Is the exit based on technicals ?.
Rules to manage trailing STOP
Position sizing/Bet size
Slippage considerations while calculating profits.
If you are going to start trading without these considerations, you will be seperated from your money in no time.
What it's not ?
A chart with pretty lines is not a trading system.
An indicator is not a trading system. Most popular indicators like MACD/SToch/RSI when used standalone have a negative expectancy. It's been already tested by many. Don't waste your time.
Most indicators tell you when to enter, without telling you when to exit. Stay away from them.
An indicator to identify a trend is a trend spotter, not a trading system.
Elliot wave or Cycles or GANN are methodologies, not trading systems
Internals are no different from price indicators. They tell you about the health of the market or the context. They are not trading systems.
Market calls are not traedable until a Buy/Sell/Stop are mentioned. Market calls without Buy/Sell/Stop is a amateur activity, mostly for entertainment.
Market thoughts, reflections, ruminations, philosphies are not trading systems. It's a individual perspective on market - nothing more, nothing less. They are not tradeable.
Saying market is bullish, bearish, sideways is a vague statement. It's not tradeable.
Dramatic calls for large declines and crashes are a sucker game, intended to attract suckers to services by vendors. The odds of these occuring are so low, that they are not tradeable.
Technical targets are not tradeable. They just say where a market can get eventually i.e move from point A to point B. How and when it moves from point A to point B determines whether you really made money or lost money in the process.
Inter-market analysis provides context. It's is not tradeable.
There are thousands of market barometers which provides warnings. Warnings are neither an entry signal or Exit signal. They are not tradeable.
Sentiment provides context. It's not tradeable.
Anything that you read, hear on TV, Magazines, Forums, Message boards, Twiittter et al cannot be traded until those are accompanied by trading rules for entry/exit and stop.
It's really astonishing how much of an adult entertainment activity this trading business is all about. 99% don't give a rats {bleeeep} to trading rules or trading plan. The "What it's not" is what attracts the masses and keep the interest alive.
Nav
--------------------
It's not the knowing that is difficult, but the doing
https://twitter.com/Trader_NAV |
