Are you tired of subscribing to signal services and stock-picking websites that only do a so-so job of delivering the goods? If so, maybe now is the time to consider building your trading system based on your knowledge of stocks, forex, and other asset classes and markets. Luckily, you don’t need to be an IT guru to develop a simple, rules-based system that includes most or all of your favorite indicators and parameters.
The main chore is to walk through a short list of guidelines, paying close attention to including all the features you deem necessary. After that, it’s just a matter of using your broker’s template for a custom-made set of rules that you can place on the website. What’s the best way to get started? Here are some critical checklist points that can help.
Every worthwhile platform for technical analysis, for example, TradingView, will let you include standard indicators as you construct your customized program. That is good news because it means you can click on a given a hand, like moving averages, to add it to your personal system’s menu. Most who reach the point of building a trading program of their own prefer to experiment with indicators like candlestick patterns, support and resistance, Bollinger Bands, momentum measurements, and MACD (moving average convergence divergence). What else should you consider including? What else should you consider including?
Do Some Back-Testing
Attempt to apply your new method to historical data. Fortunately, there are free online resources for digging up years of prior data on forex pairs, stock prices, and other asset classes. Decide which sectors and price levels will be your most common choices. Many attempts to build a trading system that can do everything. Avoid that temptation and stick with the asset classes and securities prices you’re accustomed to buying and selling.
Test the System in Demo Mode
Caution is the watchword, so you must use your broker’s demo mode for at least a week to test the new technique. The goal is to make everyday trading in the demo as realistic as possible. Stick to your usual markets and position amounts. Avoid making unrealistic transactions unless you do so only to test one or another feature of your custom-made creation.
Keep Detailed Records
During the demo testing phase, keep detailed records, so you’ll know how well your new arrangement performs. Also, be aware that final profit or loss results are not the only thing to observe. Pay careful attention to ongoing drawdown levels. You might have designed an application that wins in the long run but suffers significant account losses along the way. This phenomenon is called excessive drawdown, and it’s wise to be aware of your system’s behavior in this regard.
Choose Take Profit and Stop Loss Levels
No matter what instruments or asset classes you trade, it can be helpful to set some universal take-profit and stop-loss parameters as you design your system’s structure. This is particularly true for forex traders, who often prefer to preset every transaction with a percentage or fixed-rate stop-loss and take-profit target.