New to System Development

Discussion in 'Trading' started by specialistlowe, Apr 28, 2008.

  1. I have a question for anybody who has an answer. I'm new to system development and I because there are so many technical indicators, money management options and strategies, I don't know where to start. Does anybody have any ideas? Right now I am working on a bollinger band system but can't find a solid way to exit the trade. Anyways, any input would be great.

  2. ammo


    start with trendlines,you'll be using them primarily and forever,get good at drawing and reading them and it will help you enter and exit all your trades, they are free on
  3. Start with basic probability and statistics. Read acrary's thread about system development. Learn about "edge test" and understand what it means. Get a habit to test every idea against random using various statistical techniques.

    Forget about fibonacci sequences, golden means, trendlines, moon phases, astrology, pivot points. Don't buy any systems and trading seminars, dvds, videos and other crap.

    It will probably take 2-3 years of reading, research and disappointment before you will be able to develop a working mechanical system.
  4. I concur with this thinking, from personal experience.
  5. ammo


    you could be paper trading successfully against trendlines in a week,,start with yearly,then monthly, then weekly, then daily ,then hourly, then 30 minutes,now you have on 1 chart all the lines for the vehicle your trading,try to go with the recent direction of the last few days and if its trending up and you are long ,try to get out near the next upper trendline. Remember trendlines should be drawn with crayons that give a fuzzy general area ,they are not brick walls . Now that you have a parameter in which the market is trading,and some idea where its going ,you have to work on timing your entries and exits,no one consistently sells the tops and bottoms,after you,ve entered a trade it will most likely go against you a little,you need a stop in case it goes against you a lot,these are different for each vehicle you trade depending on avg daily range. all new traders do this backwards,when they have a small profit they take it,when they have a small loss they dont cover and the loss gets larger and they still dont cover,no one likes to be wrong. In trading you have to like being wrong and when you are you reward yourself with a small loss. The reason you enjoy doing this is because you are protecting your capital,staying alive is rule 1,you already know this.When paper trading write down your entry trades and what happened right after you bought and sold and you will see something repeating itself,take advantage of that data. That will teach you timing your entries and exits. Keep paper trading intil you are 80% right on your market predictions and 50% profitable on your trades,not amounts but winners and losers.That is pretty good if your loseres are smaller than your winners.This may be the hardest part,deciding when to get out of a trade,the 15k down to 3k says you are having a big problem here,not surprised,everyone starts, take very few trades 3- 5 a week, and only if it looks like an easy buck. Its very hard not to trade but nontrades can be more important than trades with the money you didn't lose. Eventually as you gain more experience you will see more than 3-5 trades a week and you will have given yourself time to develop good trading discipline and be a better trader. Good luck,if your extremely picky about the rest of your trades your 3k will be plenty,just treat it like $500 for now,buy some put or call sprds cheap ,1 or 2 lots under $2,and hope to catch a runner where you can make $100-$200,it doesnt sound like much,but if your acct keeps going up you will know you are turning the corner and the profit will come in time,if you protect your capital