In this series of three articles, I `m going to guide you through the process I use a trading system with MetaStock designs. I'll cover the four main components that every successful system common to trade, and I will show you how these components into the MetaStock code. Please note that this is not investment advice and any information I cover is purely for illustrative purposes.
I am a technical analyst by profession. It is my belief that all fundamental and economic influences are taken by the market. Eligible at a rate Therefore, I focus my attention on price action. All my trading systems are based on this understanding of the market and the rules of my systems are built to respond to price promotions. In this article I am having the basic rules of trading:
- Entry rules (if you are in a position)
- Exit rules (if you are from a)
- Money Management rules (how many do you have in a trade?)
- Back - Testing (does the system work history?)
These four components is a proven formula for designing profitable trading systems in MetaStock. Let's start with the first part.
A stock that a precise set of conditions by creating entry signals before you will enter a trade. That security I think it's set on an entry in a position signal lines should leave no room for individual judgment. I follow the KISS principal - ie they have to Keep It Simple Simon.
Remember, there is no holy grail of entry systems. There is no MetaStock formula that you get in at exactly the right time, every time. With this in mind, it is your goal to construct. A simple but robust entry system
Although I always say that the input is the least important part of a trading system, you should still have a way to enter a trade. Here are the points that I think are important to consider when identifying possible entry points.
PRICE: It is important to set price limits / minimums because the stock may determine its attributes. For example, speculative stocks tend to be cheaper, and blue chip stocks are often more expensive.
LIDUIDITY: This is a measure of how much money the stock trades on. You need to make every effort to keep the stocks that just do not act enough you. Minimum levels of liquidity You can risk getting caught up in stocks where the market is moving against you if they have low liquidity.
VOLATILITY: This measurement indicates how much a stock moves. It is important to share that enough exercise for you to make a profit, but are not so fickle that you can not sleep at night trade.
TREND: This is the cornerstone of technical analysis. Remember that "the trend is your friend", and you always want to deal with it, not against it. You will be required. Way to measure trends in your system
TRIGGER: This is the point that indicates that it is time to enter a trade. The trigger condition occurs only at one point in time, and no "real" and held for long periods of time, such as a moving average crossover.
When combined, these components become part of your entry rules. But, before we even start coding this in MetaStock, must be one of the most critical elements of a system to determine. What time do you trade?
+ Short term, such a reversal trader
or
+ In the long term, such a trend follower
There are clear differences between these two types of systems and your choice here will have a clear effect on every other decision you make about your system to have.
Short-term systems tend to have a greater time commitment, and more money. However, the advantage of trading often is usually your profits more consistent and more realized.
Conversely, long-term systems tend to require less time and less money. However, as you track your positions open longer, you must wait until the positions are closed before you can collect winnings. Possible
In general, I send my clients, especially those just starting out, to a longer-term trend following system. It takes less time, less money, there is less risk and it is easier to do than the short-term trading. In addition, trend following systems tend to lose a higher profit ratios and are psychologically easier to follow because of this.
For the sake of this example, let's build a trend following system. In the next two articles, I will explain how to encode the four components of entry a trend following system in MetaStock.
David Jenyns is recognized as the leading expert when it
comes to MetaStock and designing profitable trading systems.
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