Beyond Technical Analysis: How to Develop and Implement a Winning Trading System, 2nd Edition

Chapter

A System for Trading

A speculator’s trade plan is often little more than greedy entries, hopeful risk control and fearful exits.

Introduction

Trading is analysis in action. If you thought building a trading system was easy, here comes the difficult part: implementing it. In this chapter we examine the factors you should consider when you implement your trading system. If you have followed all the principles outlined earlier, you have created a trading system that is just right for you. Now, all you have to do is to execute it. We will attempt to close the gap between system design and implementation. Hence, in this chapter we focus on a system for trading.

Surprisingly, there are only two steps necessary to implement a trading system: (1) you need to have a specific trading plan, and (2) you need to execute the plan. You will be surprised how easy it is to trade without a plan and without a system to monitor implementation.

The first hurdle you must overcome is that system testing does not solve all your problems. Second, you must understand something about your interaction with the markets when you start trading. Third, there are other key issues such as risk control and money management that need attention. Last, you need a tool to organize your trading.

The Problem with Testing

Even though trading occurs in a pressure cooker of emotion, testing is performed in an emotional ...