My name is Marek Hawk and I am a professional trader of Horizon Trading team. Today, I would like to share with you the prescription how you can build the working trading strategy. Sometimes it can be very hard if you do not have experience with developing new trading systems so this why I want to teach you our team workflow of building new systems. Many new traders do not put enough emphasis on their personality type, and they make a mistake just at the beginning of their trading career. Take advantage of this article and use our methods mentioned here for building your own unique successful strategy.
Finding Your Style
Trading is one of the most competitive industry in the world. Everybody wants to make money in long-term and nobody wants to lose. Finding out your competitive advantage is your fist step you need to undergo. But at first, you need start with yourself.
At early stage of trader’s development, it is very important to identify his or her strengths and weaknesses. We as a traders need to gain as many advantages as we can on our side. First, it is very important to think about time you would like to invest into your new trading business. Day trading is much more time demanding but can offer bigger money returns. Swing trading on the other hand is very reasonable for somebody who needs to attend his/her full-time job or has got other activities which take bigger portion of his/her day. Do not expect good results from day trading if you are not going to invest your time into this business, however, swing trading would offer you opportunities to make money despite lack of time. Time and your strategy should be in-line with each other.
Personality type is very important for a trader and it is connected to your trading style. Someone is stronger as a strategic player and with this attribute he will be probably more successful as a swing trader. Day trading involves more fast decision making and deeper focus. It is very connected to the skill of a trader. In case of building a strategy with competitive advantage (trading edge), these are the aspects we need to take into the account.
With the connection of personality type – we can distinguish 2 basic approaches: aggressive and conservative. Aggressive personality type tends to trade more often and put their money under higher risk. Sometimes it is common issue of overtrading and losing money in the end, therefore it is important to identify structural competitive advantage in aggressive styles. Aggressivity can be well-build into trader’s setups and this strong weapon is ideal for aggressive entry tactics like opening drive play in case of stocks trading. Conservative traders like to trade less, but the situations with higher probability in their favor. Disadvantage of this style is that sometimes trader can miss an opportunity. It is about the balance between personality type and strategy.
It is very important to think about trading in terms of risk-reward ratio and probabilities of winning. Some traders can feel more comfortable with winning more often but with lower reward per trade. It is usual for fast timeframes. Swing trading strategies tends to go for bigger reward but with less probabilities on trader’s side. The choice of the strategy is always up to trader and should be also in a synergy with trader’s personality.
When you think about dichotomies mentioned above and you can analyze yourself, then it is time to go with your answers to another step.
Finding Competitive Advantage
After you accessed your time possibilities, personality and skills, now it is right time to go find your competitive advantage on the real markets. There many tactics out there. For example, me, I tried a lot of tactics and what has been working best for me, it’s has been Price Action. In our Horizon Trading Team, we have traders who also trade indicators and I believe it is about feeling natural with the strategy.
If you are more experience you can make up your new trading ideas which could work in the end. For beginner or even experience traders we share our powerful Horizon patterns for scalping, day trading, swing and position trading for all the markets. If you are searching for a new day trading strategy, just go to this article and check the pattern with all the details here.
For more swing-oriented traders, I wrote this article, click hete. After reading I believe that you can build powerful money-making strategy just based on the ideas mentioned there.
Setting Entry and Exit Rules
Once you found your competitive advantage, it is time to create objective rules for entries and exits. Your task is a creation of strategy aimed at repeatable trades based on common scheme. Because of these rules you can always decide whether is right time to enter the trade or close your position. It will help you enter the market without hesitation.
Creating Trading Plan
This is a very crucial part and very often underestimated. The best trading strategies are closely correlated with the amount of work and detail which trader put into his/her strategy development. More detailed your trading plan is, more likely that your trading strategy will succeed. Of course trading plan must consist of entry and exits rules, more over must involve topics such as skill assessment, mental preparation before trading, risk level setting, trading goals, trade opening checklist, method of building records of your trades, etc. More concrete you will be here, the bigger is the chance that you will be doing well on the markets.
Backtest and Paper Trading
Unique attribute of trading business, in comparison with any another business, is that you can test your ideas on historic and real-time data. Why do not take advantage of that? You need to make sure that your trading idea can work. For that they are used these 2 methods:
Backtest is very fast method of testing your trading ideas on historical market data, therefore it saves you a lot of time and money. Your trading strategy must be backtested before trading live! You can backtest a month of trades in one day, build your statistics and then even confidence in your trading strategy. This is the prerequisite for trading with real money. We like to backtest our strategies on our forex tester which we are giving to our clients for free.
Paper trading gives you opportunity to trade simulator with real-time chart data. It is perfect for testing if a strategy is executable in real world. Very good also for the beginner to get familiar with platforms, orders, alerts and so on.
Trading with Real Money
Last step is to put your strategy into the real world. You went through all necessary steps needed to minimalize the risk of loss and raising the winning chance. You already know how your strategy is performing on historical data and real-time data because of backtest and paper trading. Still as a trader you need to carry on with the trading plan and put more emphasis on your psychological side of your strategy. You should track your results, but more importantly, focus on proper strategy execution.
Today’s article is about general workflow “How to Build Trading Strategy”. I focused mainly on the part of synergy between trader’s personality and trading strategy. This is a crucial step in our workflow of building new trading strategies. Selecting a strategy which is not in-line with personality of a trader is common mistake leading to failing in the trading business. I presented some hints how to find competitive advantage and deep examples for different types of trader’s personalities. In the end I mentioned common techniques of testing new strategies and hints how to carry on with execution your strategy with real money.
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