How to build your Trading System?

How to build your Trading System?

A simple trading system should include:

Step 1 Strategy to decide which direction to trade.

Step 2 Before you enter a trade, set realistic profit targets and risk/reward ratios. What is the minimum risk/reward you will accept? Many traders will not take a trade unless the potential profit is at least RR>3. For example, if your stop loss is $1 per share, your goal should be a $3 per share in profit.

After step 1, it does not mean you can open a position anywhere, anytime you like. You should wait for a confirming entry signal. Usually, we would use RSI and Bollinger Band with candle pattern to help us on this step.

Step 3 No one can be 100% accurate. Control risk could help you have more chances to trade.
How much of your portfolio should you risk on one trade? This will depend
on your trading style and tolerance for risk. It should probably range from around 1% to 5% of your portfolio on a given trade. And you should not trade too many times a day since trading opportunities do not happen all the time.

Step 4 A trade always end with three possibilities: target hit, stop loss hit or manually close with your Exit Rules.

Step 5 Do Your Homework. Many experienced and successful traders are also excellent at keeping records. If they win a trade, they want to know exactly why and how. More importantly, they want to know the same when they lose, so they don't repeat unnecessary mistakes.

If you already a profitable trading system and keen on planning and recording all your trades, congratulations, you are in the minority on the way to trading successfully.


Good luck!!!
LESS IS MORE!