Developing A Trading Strategy


Wait some time and see what happens with the strategy once you’ve created it. If the strategy trades successfully in several markets, that could be a sign of robustness. It shows that the strategy seems to be based on a strong tendency that’s prevalent across many markets.


As such, the market’s expectation, as well as storage costs, if it’s a physically deliverable contract, are priced into the individual contracts. Now, if you want to create trading strategies on one market, then you could probably go with either of the platforms on the list. Even if TradeStation is a powerful trading platform, it’s not the fastest of them all. However, it’s still fast enough to cover most people’s needs, as long as you’re not doing portfolio backtests. Then there are better alternatives available, such as Multicharts or Amibroker. As scalping requires larger position sizes than other trading styles, traders need to be extremely disciplined.

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To account for this, the strategy can be assigned the startup_candle_count attribute. This should be set to the maximum number of candles that the strategy requires to calculate stable indicators. In the case where a user includes higher timeframes with informative pairs, the startup_candle_count does not necessarily change. The value is the maximum period that any of the informatives timeframes need to compute stable indicators.

Informative Pairs¶

A quantitative system may monitor price action on a specific asset which moves in correlation to a larger market. Mean reversion is a popular quant strategy based on the idea that price movements have long-term trends, so divergences from the trend will likely self-correct in the future. Quantitative systems built on mean reversions will find markets diverging from long-standing trends and open a trade in the opposite direction. Building this model, or even just running it, requires a large amount of institutional knowledge in finance, mathematics and programming. Learn how to create a successful trading plan and put it into action.


Remember, your trading plan is a personal roadmap – you should therefore consider your own, unique circumstances when creating one. Any trading goal shouldn’t just be a simple statement, it should be specific, measurable, attainable, relevant and time-bound . For example, ‘I want to increase the value of my entire portfolio by 15% in the next 12 months’. This goal is SMART because the figures are specific, you can measure your success, it’s attainable, it’s about trading, and there’s a time-frame attached to it.

Additionally, the information was not available to retail traders. So, despite the fact that there are hundreds of existing strategies to use, you can try to build your own one. Its undeniable advantage will be that it will take into account your personal approach to Forex trading.

Step 5: Define Entries & Exits

However, always a good rule of thumb to look for strategies that work with many parameter combinations. In general, it’s harder to apply trend following to stocks than to commodities like Energies, which tend to trend quite a lot. Mean reversion is the tendency of markets to revert to their mean.

Use string formatting when accessing informative dataframes of other pairs. This will allow easily changing stake currency in config without having to adjust strategy code. As these pairs will be refreshed as part of the regular whitelist refresh, it’s best to keep this list short.

Don’t focus only on the profits you can make on all trades, as this can lead you to take too much risk simply to avoid losing trades. You might be able to memorize the rules of its methodology. However, it is best to write in detail the rules of our system. Having a written trading plan is a robust method of ensuring discipline and consistency. It also provides a record of your strategy and can be very useful when we want to refine it.

Learn a few trading tools and indicators, and you can do it. The USD rally is on pause this morning as traders position with caution on US Presidents Day. Reaction to data later this week could be crucial as to whether the USD rally has run its course.

  • Throughout the trading period, risk tolerance is bound to change.
  • Some new traders prefer to take on a lower risk to test the waters, while some take on more risk in the hopes of making larger profits – this is completely up to you.
  • Price is king but what does it take to trade price action successfully and why do so many traders struggle with it?
  • Quants traders build the trading strategies, backtest it and then use the existing execution systems in their organizations to implement the strategy and carry out trades.
  • The amount of time you need to dedicate to studying will depend on your goals and how much time you can commit to learning each day.

The more confident you are in a strategy, generally, the more real money you should be prepared to risk on it. Let’s say that your winning positions have earned $500, and your losing positions are at $350. Your profit factor will be 1.43, which means that you’re making money, as when you risk $1 in loss you get $1.43 back. If the results turn out to be profitable, then your trading strategy has a positive expectancy and you would have made money with it at that time. To get the best results possible, you can refine some of your parameters and retest. With position trading, you might trade using a daily timeframe.

Strategy Customization¶

Note the candle, which closed with a long bottom shadow on a splash of the maximum volume. The Open Interest indicator, first, fell to the mark of -6484, but the open interest again increased by the moment of the candle closing. This tells us that there was a wave of sells, on which a part of long positions left the market.

This is completely fine if you specifically are looking to develop a strategy for one market. For example, if you want to find a new swing trading strategy for the stock market, then it’s natural to go with S&P-500 or S&P-100 stocks, just to give an example. Survivorship bias is another issue you need to cope with when you’re building trading strategies on stocks. If you’re testing your strategy on an index, then there will be stocks that have fallen out of the index, and others that have been included. While backtesting a strategy manually is possible, it’s a tedious task that won’t take you very far. With the help of a computer and a good backtesting platform, you could speed up the process significantly, and in the end, find many more trading strategies.


This is because there is only a need to study charts at their opening and closing times. Every day, there are several news events and economic releases that can provide trading opportunities. You can follow crucial news announcements by monitoring our economic calendar.

If you have medical coding career guide to watch the market for extended periods, try intraday trading. You don’t want to be overwhelmed by a complex strategy right from the start. Moreover, a trading strategy with more moving parts is harder to manage and improve. On top of that, you’ll realise that trading profitably goes beyond your trading strategy. However, it’s not realistic to think that your first trading strategy will make you rich.

Long-term investment can accommodate higher risk levels, and investors can identify trading opportunities when the market is volatile. Only we must learn some technical analysis tools and indicators, and with this we can start with the creation of a strategy. However, it is unrealistic to think that your first strategy will make you a profit . Finding a methodology that offers an objective sale in the market is difficult. Also from that, the trader will realize that profitable trading goes beyond a trading system.

Furthermore, you will explain the logic behind every indicator and tool you use in your trade analysis. During the first stages developing a new strategy, you should outline what the goals of the strategy are, being specific as possible. Loose definitions lead to strategies that aren’t repeatable and red trading accounts.

As a TradeStation client you get free access to the platform AND market data. This could save you quite some money in the long run, since market data could be quite expensive. AmibrokerAmibroker is a very competent backtesting platform that’s the fastest of the ones on this list. It runs a slightly more advanced coding language, but it’s still manageable, even for a beginner.

Trade On Drift‍

To create a strategy, you’ll need access to charts that reflect the time frame to be traded, an inquisitive and objective mind, and a pad of paper to jot down your ideas. Then you formalize these ideas into a strategy and “visually backtest” them on other charts. In this article, we go over the process from start to finish and offer important questions to ask along the way. Choose exit rules – make a rule for Take Profit and Stop Loss orders.Not only there is an entry trigger, but an exit trigger as well. It is a moment when you understand that it is time to close your trade. The exit trigger is useful not only when you fail, but even if you have a profitable trade because a market will not be by your side forever.

As opposed to the setup, it is a technical signal that indicates the right moment for entering the market. It is quite important to know your particular trigger to enter the market without any hesitation. It can be candlesticks, bar patterns, indicators, and oscillators. A trading plan sets out the strategies of buying and selling assets, ranging from bonds, stocks, futures, options, FTEs, among other securities. When creating a trading strategy, an investor works alongside a broker-dealer to choose profitable trading products and manage trading activities.

Scalpers do not hold overnight positions and most trades only last for a few minutes at maximum. By definition, intra-day trading requires no trade is left open overnight. Some trades will be held overnight, incurring additional risks, but this can be mitigated by placing a stop-loss order on your positions. This style of trading requires less time commitment than other trading strategies.