I'm working on developing my own strategy for trading equities. I've developed some entries that solely depend on morning intraday support and resistance. Meaning, when price breaks the intraday support or resistance, its a buy / short sell. I can't figure out how to backtest something like that so I'm just going to track them for a while. I'm also working on a few entries using bollinger bands with 2 standard deviations. Just wondering if this is a good enough skeleton system to base my trades on. Obviously it will be tweaked so that it gives me clear setups to entry. Is this how people develop a system ? Starting with a skeleton system. Only indicator is BB's and support / resistance. Someone help me through this please !
You'll find most ideas that are tested don't work out when backtested on a portfolio level backtester. Happens all the times. There is a huge discretionary element in picking tops and bottoms that a basic 2 stdev system or Bollinger band system will never be able to catch. JMHO
this more than it is necessary. The best system -is a simply system. I use BB for filtering a short trades. And my long trades based on one modifyed MA.
the current entries I have that involve BB's with 2 standard deviations are have a time range of a 5-30 mins. Usually I'll stay in the position for 10 mins. My system is more leaning towards scalping based on my high percentage entries using BB's. Staying in too long will just result in -EV. I find that when I do have an entry that breaks resistance, its usually good for a 10 min scalp as well. usually I'm looking for about 15-30 cents on a $20-$30 stock.
I've also begun to count how many entries my system would have provided. I'm not counting wins or loses b/c without doing it in realtime, it doesnt matter. PS: Determing where my entries would have been looking back at the end of the day is not discretionary. I've already written down my parameters to entry. No subjectivity is taken place. 11/06 and 11/07 have yielded me 18 and 25 entries each. Perhaps I should create a journal ? I dont know. 11/07, through gappers and % price movers, I had a list of 18 stocks by 10:00 that I was following. Obviously, if I was actually trading this system, I wouldnt have caught all 25 entries today. And once I continue to tweak my system, and find more setups to entry, my daily possible entries will increase. To make things clearer, on a $20-$25k position, my goal is $200-$250. Granted I will let winners ride if they arise. Unfortunately, I've found that I'll likely create a 1:1 stop. Which means a stop loss of $200- $250 as well. I'm still open to suggestions, as I'm going to take my time developing this. I know most of you are going to yell at me for this. And you have the right to. It sounds ridiculous, having 1:1 risk to reward. But I'm finding that I'll get stopped out too much w/o it. And it seems as though, with such a wide stop, it gives the entry time to develop if I indeed got in a little early, which sometimes is the case when I'm dealing with breaking through supp / resistance