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How to build Trading system?

  • #1
  • First Post: May 26, 2007 8:27am May 26, 2007 8:27am
Hi All,
Lately I am trying to build trading system. My questions is referred to the people that done it before.
1. How did you test it?
2. Which indicators are you using and how did you choose them?
3. What kind of result should I look for? For example I know that if I use MA whole range numbers should be used and give similar results (not over optimize)
4. What is a descent period of time that the system should be tested upon?
5. Ones you started to trade with your system how did you find it? What problems did you encounter?


Thanks,
Avihu.
  • #2
  • May 26, 2007 9:20am May 26, 2007 9:20am
I would suggest recognizing your weaknesses as a trader ( I'm sure you have a handful by now ), and turning them into your edge's. This thread will not yield any beneficial answers for you in terms of exact steps that need to be taken to ensure your success. You really need to look inside, identify why you fail, and find a way to turn those inadequacies in to your secret weapons. I've always identified with the fact that the trader doesn't find the system, but rather the system finds the trader.

Good luck.
MM
  • #3
  • May 26, 2007 9:22am May 26, 2007 9:22am
mcdonalds
  • #4
  • May 26, 2007 9:32am May 26, 2007 9:32am
Quoting piccolo
mcdonalds
See what I mean about the thread not providing you with any real solutions toward building a system for you. Unless Piccolo means buy McDonald's stocks... that's probably the only system you'll ever need.
  • #5
  • May 26, 2007 10:12am May 26, 2007 10:12am
I failed because i did not had a good trading plan. I thought that if i just watch the market i will get it .

Didnt happen.

I guess the fifth question is most intersting me.

thanks,
Avihu
  • #6
  • May 26, 2007 11:05am May 26, 2007 11:05am
One of the phases is to let your system take 100 Live trades and only then consider it successful.

Quoting avihud
Hi All,
Lately I am trying to build trading system. My questions is referred to the people that done it before.
1. How did you test it?
2. Which indicators are you using and how did you choose them?
3. What kind of result should I look for? For example I know that if I use MA whole range numbers should be used and give similar results (not over optimize)
4. What is a descent period of time that the system should be tested upon?
5. Ones you started to trade with your system how did you find it? What problems did you encounter?


Thanks,
Avihu.
Bullish Attitude!
  • #7
  • May 26, 2007 1:00pm May 26, 2007 1:00pm
Quoting avihud
Hi All,
Lately I am trying to build trading system. My questions is referred to the people that done it before.
1. How did you test it?
2. Which indicators are you using and how did you choose them?
3. What kind of result should I look for? For example I know that if I use MA whole range numbers should be used and give similar results (not over optimize)
4. What is a descent period of time that the system should be tested upon?
5. Ones you started to trade with your system how did you find it? What problems did you encounter?


Thanks,
Avihu.

1. How did you test it?
1) Demoing for about a year, my base system has remained the same after about 5 months in, however, I do add to it from time to time.

 2. Which indicators are you using and how did you choose them?
2) I consider almost anything an indicator with the exception of price action. I.E. an indication of where to look for price action. I currently use Price Action, Support and resistance pivots (daily and weekly) My classification of S/R is the standard formula (H/L/C) areas of congestion, daily/weekly high/lows, MA's and trend lines. I also use Macd, stochastic for trend strength, keltner channels 25 period, 4 factor (for ranging markets), 365 EMA and a 50MMA. Afraid it's way to long of an explanation as to how I use each indicator, short answer is I look for price action around where each indicator would say enter or exit.

 3. What kind of result should I look for? For example I know that if I use MA whole range numbers should be used and give similar results (not over optimize)
3) This is solely dependent on what you want and what your system can produce comfortably.

 4. What is a descent period of time that the system should be tested upon?
4) I've heard varying responses, the more cautious being 3-4 months.

 5. Once you started to trade with your system how did you find it? What problems did you encounter?
5) At first naturally my system was flawed, over time it just worked it self out. As most systems do if you give them the time they deserve. My biggest problem at first was clear entry and exits, so my stop losses often where rather to large for any money management technique. At the time I wasn't using S/R like I should, once I found that part of my system it corrected itself.
  • #8
  • May 26, 2007 4:37pm May 26, 2007 4:37pm
Quoting shadeslay
1. How did you test it?
1) Demoing for about a year, my base system has remained the same after about 5 months in, however, I do add to it from time to time.

 2. Which indicators are you using and how did you choose them?
2) I consider almost anything an indicator with the exception of price action. I.E. an indication of where to look for price action. I currently use Price Action, Support and resistance pivots (daily and weekly) My classification of S/R is the standard formula (H/L/C) areas of congestion, daily/weekly high/lows, MA's and trend lines. I also use Macd, stochastic for trend strength, keltner channels 25 period, 4 factor (for ranging markets), 365 EMA and a 50MMA. Afraid it's way to long of an explanation as to how I use each indicator, short answer is I look for price action around where each indicator would say enter or exit.

 3. What kind of result should I look for? For example I know that if I use MA whole range numbers should be used and give similar results (not over optimize)
3) This is solely dependent on what you want and what your system can produce comfortably.

 4. What is a descent period of time that the system should be tested upon?
4) I've heard varying responses, the more cautious being 3-4 months.

 5. Once you started to trade with your system how did you find it? What problems did you encounter?
5) At first naturally my system was flawed, over time it just worked it self out. As most systems do if you give them the time they deserve. My biggest problem at first was clear entry and exits, so my stop losses often where rather to large for any money management technique. At the time I wasn't using S/R like I should, once I found that part of my system it corrected itself.
good post.

my advice would be to take any system and just trade it.. follow the rules till you can improve them and it will come to you. for example a 9ema and 21sma un 15min GBPUSD.. buy when ema is above sma, sell on opposite. soon you will find out that the system doesn't work "always" but with time you will develop a feeling when certain things does and does not work. ma crosses work on breakouts only. its all about analysis. take a system and trade it for a month without breaking any rules (given that the rules are clear and easy to follow with no discretion). this is just for discipline and experience. then move on. don't try to put the cart before the horse.
  • #9
  • May 26, 2007 8:18pm May 26, 2007 8:18pm
on the internet there are many profitable system available. y build your own when there are system that are profitable and have been tested. take one system, understand the rules and just trade. forex is not about how clever u r. its about money management and most important of all discipline.
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  • #10
  • May 26, 2007 8:42pm May 26, 2007 8:42pm
my 2c...
Quote
1. How did you test it?
start by backtesting your system... by backtesting, i mean pen, paper, trade by trade, depending on what timeframe you are trading, get a bunch of smaller timeframe data to allow for intraday swings, etc... if it proves profitable over "x" periods, then try it out on a demo account live trading.
"x" periods, numbers get thrown around, 500, 1000... with a daily system, say maybe two years.. the last two years has decent trends and a decent amount of ranging, so a good mix to test on.
Quote
2. Which indicators are you using and how did you choose them?
that is up to you... the indicators aren't going to make a system work, they are there to help YOU make a decision on whether to enter or not depending on YOUR view of what that indicator means... in saying that, keep it simple..
Quote
3. What kind of result should I look for? For example I know that if I use MA whole range numbers should be used and give similar results (not over optimize)
keep it simple.
Quote
4. What is a descent period of time that the system should be tested upon?
see my first answer
Quote
5. Ones you started to trade with your system how did you find it? What problems did you encounter?
back testing results often outperform live trading..... sometimes it's little things you didn't allow for/think of, then when live demo trading situations occur, so you go back and fine tune your rules... as long as it's only a fine tune, not "curve fitting".. you need to be on top of your psychology/emotions at all times, be aware of the reasons for why you trade, why you want to change your system, why you chose "that" system...

I have read through some great ebooks that list 50 to hundreds of questions that will really make you think about why it is that you trade, and what you want to achieve, how you react, etc. etc.. it's a great place to start before placing your first order.

"The Way To Trade" was one, very in depth questions to develop your trading plan.
The other one was Ultimate Trading Sytems I think....

have fun!
  • #11
  • May 26, 2007 10:10pm May 26, 2007 10:10pm
I'm afraid most people who know answer to your questions won't be bothered to answer. You have to figure it out your self. One clue: mathematics, statistics, mathematics, statistics, mathematics...and so on...
Good luck,
L

ps. It ain't easy - otherwise everybody would be a trader.
  • #12
  • May 26, 2007 10:34pm May 26, 2007 10:34pm
It is not the system. It's you. Work on developing you not a system.

I found that after failure after failure I finally started trading successfully and profitably when I made a few critical decisions about myself as a trader.

1) I would keep what system I used simple. If it got complicated then I would stop and resimplify or start over.

2) I would make several decisions about myself as a trader that would keep me from driving my account into the ground again. (I have about 5 decisions that I made which have changed me into a profitable trader)

3) I would immerse myself in learning, reading and even writing about forex trading, indicators and market behavior till my brain was so full that it might explode. I read and read and researched and sucked in everything I can get my hands on about just four things - moving averages, stochastics, rsi and daily market analysis.

Your passion for forex is determined not by how much you trade, but by how much you read, watch, study, analyze, experiment, dream, record and think about it.
  • #13
  • Edited 9:16am May 27, 2007 1:43am | Edited 9:16am
I came across this today and felt inspired to jot down some of the things that have worked for me, many in a simple form have been mentioned already. Learning forex and reading all you possibly can will make you a better trader, whilst piggy backing off of others recommendations of entries and exits will more than likely have its pitfalls. As you try and develop a system called you own, if it is good or bad, just trying to apply a detailed plan will help in your trader development. I have built good systems and absolute crap systems, but have gained from every one of them and have become a better trader as a result of learning how to improve. As I started to jot down some of the detailed thoughts and ideas I have when developing, it took on a life of its own and ended up being 8 pages, so here attached are my basic criteria when developing...hope this helps.

Cheers,
Northpro
Attached File(s)
File Type: pdf Building a Trading System.pdf   44 KB | 970 downloads
  • #14
  • May 27, 2007 2:11am May 27, 2007 2:11am
Quoting KudzuFX

Your passion for forex is determined not by how much you trade, but by how much you read, watch, study, analyze, experiment, dream, record and think about it.
It's funny you should say that, there's been many a nights when I close my eyes to go to sleep and I all I see are charts and price action patterns. Burned into my brain from trading to much.

Here's a nice little thread as well that could be helpful.

http://www.forexfactory.com/showthread.php?t=6423
  • #15
  • May 27, 2007 5:08am May 27, 2007 5:08am
Take the concept of new strategy.
For example: I shall open on crossings MA, and to be closed on TP/SL.

Take the good program such as جز with a tester.
Take a fish of the expert, that's most similar to your concept.
Include the Longs only. Later then include Shorts.
Insert codes for entrances and for closes.
Choose the most severe mode of modeling.
Take TF, on which assume to work in real.
Choose the period in one week, diagrams before eyes with thrown
indicators with the same parameters, as in the expert.

And work, work, work... Arbaiten, arbaiten...

Day after day, alone on a hill,
the man with the foolish grin is keeping perfectly still...
Days-weeks-months...

The wife begins to hate you...

Finally u'll create the real expert, which ALWAYS gives profit
and with rules of your MM. The last u need is to transfer rules from your
expert onto one paper page.
A rose will bloom, it then will fade...
  • #16
  • May 27, 2007 7:01am May 27, 2007 7:01am
wow ,
Thanks you all for the detailed replays.
Thanks,
Avihu.
  • #17
  • May 27, 2007 12:06pm May 27, 2007 12:06pm
Since I am a Trend Trader and I truly believe that trading the trend is the only way to success in the long run, I'd say that the very first step to any system-building process (at least for me) would be to find the tools to spot healthy trends.
  • #18
  • May 27, 2007 3:11pm May 27, 2007 3:11pm
Quoting WTB
Since I am a Trend Trader and I truly believe that trading the trend is the only way to success in the long run, I'd say that the very first step to any system-building process (at least for me) would be to find the tools to spot healthy trends.
Do you have any particular favourite tools that do this?
  • #19
  • May 28, 2007 9:19am May 28, 2007 9:19am
Quoting Bemac
Do you have any particular favourite tools that do this?
My trading system is based on analyzing the trend's health by studying price action around the 30, 50 and 100 SMA and whether different levels of support/resistance hold around those SMAs.

In my opinion, spotting a trend is easy but understanding the health of that trend is not so. That's what I use those 3 SMAs for.
  • #20
  • May 28, 2007 12:45pm May 28, 2007 12:45pm
Quoting WTB
In my opinion, spotting a trend is easy but understanding the health of that trend is not so.
Aye very true by my observations as well, I use other indicators for that myself. But it's one of the harder things for me to judge. I'm still some what new to trend following, although I have come to the conclusion trend following even on shorter time frames offers some of the best exits when used with price action. I kind of started backwards if you ask me, with short term swing trading. But it all works out with time invested.
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