5 Steps Towards A Rule-Based Trading Structure

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This kind of trading system is really appealing to some traders because trading requires a lot of emotion. If you find yourself too upset while dealing, this sort of exchange can be for you.

A trading structure based on laws has specific guidelines on all exchange components. A dealer can not deviate from the rules. The basic principles include entrance requirements, batch size, maximum economic risk, control of the exchange, maximum portfolio risk, and exit criteria.

Essentially, there are three types of structures based on rules:

Automated methods 100 percent
Manual market management techniques
A hybrid of manual and automatic components (Incremental Automation)
Whatever you want to use, this guide will teach you how to create a program that works for you.

Phase 1: Learn What Goes For Your Personality
Personality in commerce

This is a really critical move so don’t neglect it.

Most novice traders feel they don’t have to care about the right system/personality because they just have to obey the rules to make money.

SEE ALSO: Trade tutorial for beginners for free forex

Nothing could go beyond the facts.

You have to consider how you react to the results, even if you have black and white rules.

You may have a very efficient system, but you’ll give up because you can’t handle other elements of the system.

Let’s dig at the key things you should think about.

What are the objectives?
The first thing you should consider is your trading system objectives.

If you want a tiny wallet to be multiplied? Or would you like to keep a stable income from a bigger account?

There are really critical questions that you have to ask yourself before you start.

Your answer to this problem defines the type of system that you are setting up.

It helps write down an overall target for which you must aim.

Several traders want to make 10,000 dollars annually (yes, seriously). Nonetheless, 30 percent a year will be more than enough to fulfill their needs for a respectable account … with far less pain.

And look objectively at what you actually expect from your trading network.

In your trading strategy, set down your priorities.

Removing drawing
Most traders tend to make big dollars. However, high gains typically often mean big drawdowns.

Can you live with that?

Many merchants can do that.

In my experience, however, most traders can’t.

Be careful, therefore, about the drawdown numbers. A drawdown of 40 percent may not be a big deal when trading demo. But when real money is on the line, psychology can change dramatically.

If the emotional impact of a drawdown on a demo account is difficult to feel, open a small real cash account and use nano lots.

You may find that you are prepared to accept a higher or lower drawdown than you anticipated. This is why checking different kinds of trading systems is important in order to find out what works best for you.

Speed of trade
Next, it is important to understand how often the strategy works and how often you feel about that.

For instance , let’s say your plan only carries out a few businesses a month. But there is a high probability of success when it comes to trade and you usually have some large winners, because you trail your losses.

What sounds okay?

Okay, it sounds awful to some merchants. These traders are easily bored and want to sell more often.

The opposite can also be accurate.

If a system performs too many trades, some traders are stressed that they have to trade all the time or that too many trades are open all the time.

So take some time to consider your optimal frequency of trading.

For all, it’s not the same.

Percentage Winning
Are you the kind of investor who enjoys a high rate of win? Or do you prefer to win less often, but are multiple returns more costly for each trade?

I know that a dealer wants to go to 100R trades. But only about 20 percent of the time he wins. Can you manage eight losing companies (or more) in a row before you got a winner?

Or would you like to do 1R, but win 75 % of the time?

Both methods are useful.

There are no correct or wrong responses here.

It’s all about what you’re best at.

Again, seek both to see what you want.

Completely automatic, manual or both?
Awesome dealer

The processes for joining and leaving companies will make a major difference in the trading performance.

For example, if you need to automate your trading system to be successful but do not know how to implement an automated trading strategy, this approach will not work for you.

You will still read, however. Take our MT4 Programming Courses from Adam Hartley, the master developer.

You should obviously always search for the author to write it for you. A list of programmers and a guide to choosing the right one are given below.

On the other hand, you may not have faith in an integrated program and would like to run business yourself. If that is the case, then be sure that you can trade when your company is normally founded.

SEE ALSO: The books that have changed my life.

If your machine has its best business normally at 3:00 am local time, it probably won’t work as a manual system.

Backtesting and beta testing are therefore so necessary. You want to identify the blind spots in your system so that you can make up for them.

Step 2: Create a Written Trading Plan
The next step is to write down the rules of your profession.

This means that you have a good foundation for all your company decisions.

Using any recording tool that works for you but I find that the easiest way to work with ol’ pen and paper is for me. Notes and improvements are easier to take during the development process.

Take Mobile Notes

Since I have made program improvements, I’m going to put it in Evernote.

You can download a free PDF worksheet here if you want a blueprint for your trading strategy. I think printing a lot of these and leaving them on my desk is useful.

I jot it down when I have an idea, so I don’t think about it. Then I will return later to improve the idea.

The following components should be in a successful trade plan:

Name of the exchange system
Number of edition
Indicators used for setup
Criteria for admission
Laws of Exchange Operations
Laws of Attack
Return guidelines
Portfolio Exposure Rules
Is this manual being sold, fully automated or either of the two?
There may be other things you wish to add later, but that list is a strong beginning.

You can get a trading strategy on the internet from other outlets. You will get them from classes, forums and blog entries, there is no shortage of them.

See the approaches we discussed in this segment.

I also propose that the trading strategy groups of MQL5 Codebase and TradingView be investigated. They are a big mish-mosh of tactics of varying quality standards, but they will give you some interesting ideas.

You can also show the file and copy / paste ideas. If you consider a technique that really works, it can be a perfect starting point.

But how do you know if you have an edge with a trading plan on the markets?

That is what backtesting is …

Phase 3: Check the trade strategy rules Backtest
A headphone dealer

Next time to test your plan so you’re sure it works in real-world trading. Study our free guide here if you’re new to backtesting.

There are different methods to check and the optimal technique depends on the type of approach you have.

For examples, if you have a completely automated approach, testing in something like Forex Tester or MetaTrader 5 can be considered. These are good forums for automated forex strategies.

Forex Tester, MetaTrader 5 and TradingView are all popular tools for checking if you have a technique manually applied.

Your backtest will provide you with some valuable information:

  • Removing drawing
  • Level of Win
  • The longest line of win
  • The longest streak of defeat
  • Best / Worst Trading Days
  • Best / Worst Trading Times

And more! And more!

If you are not given any of this data on a backtesting site, you can also export it to a table to classify it.

Don’t expect the first effort to hit the jackpot. Nearly always, a positive backtest comes from many, many tests.

Productive traders make minor changes and check the results. Try to modify just one thing at a time and check it.

Otherwise you do not know which improvements have succeeded and which have not.

When you have a plan that meets your targets, you are able to continue.

Phase 4: Check the Rules Beta
After checking the approaches and depending on the tests, don’t immediately hop into live trading. There’s another step ahead of you to lose real moola.

This is known as beta or forward checking.

You don’t want to leap straight into live trading, because you still have a few things to do.

For starters, if you have a completely automatic trading strategy that runs on MT5, you can probably check it with the broker you plan to trade with live in a demo account.

The degree or server lag of the broker can affect the way the strategy operates in live conditions. Even the findings will be very different.

So run this beta check for a couple of months, to make sure the trading program has no other secret issues. If you’re convinced it would work as you planned, it’s time to live now!

Step 5: Go Live
Blessed dealer

Now is the time to introduce the program. I’d consider starting with a small account or starting with a lower chance.

There can still be some unforeseen variations between the live server of the broker and the demo site.

But if anything is fine, let your plan loose!

Please keep track of your trades in a trading log so that you can check the results every week.