Cybernetic Trading Strategies: Developing a Profitable Trading System with State-of-the-Art Technologies

15

Developing a Trading System

Developing a trading system can be a very difficult process if you do not understand the steps involved in building a reliable and profitable system. If you understand the steps and have trading methods that are sound, it is less difficult to build successful trading systems.

STEPS FOR DEVELOPING A TRADING SYSTEM

To give you an overview of how to build a trading system, the necessary steps are listed in Table 15.1,

Let's now discuss each of these steps in more detail.

SELECTING A MARKET FOR TRADING

You should select a market that offers you access to domain expertise. When developing a trading system for a given market, you need to understand what factors affect price movements in that market. If you want to develop a system that works on multiple markets, it is important to understand the potential markets well enough to find common technical characteristics that can be used in developing a multimarket trading system. After you have selected your market(s), it is very important to decide what time frame you want to trade on and to have an idea of how long you would like your average trade to last.

TABLE 15.1 STEPS IN DEVELOPING A SYSTEM.

Decide what market and time frame you want to trade. Develop a premise that you will use to design your trading system. Collect and organize the historical market data needed to develop your model into development, ...