The Internet is full of various trading systems: paid and free. Any trade starts with testing of the trading strategy on a demo account that lasts at least several days to analyze the number of unprofitable trades and the maximum loss. Trading system in the foreign exchange market – is a program, algorithm, based on the indicators of graphic and technical analysis, and is designed to work only with a specific asset in a specific timeframe. Below I will talk about the basic parameters on the basis of which it is possible to develop your own trading system in the currency market.
Creating your own trading system in the currency market
The algorithm for generating trading system in the Forex market is relatively simple: you can create your own strategy roughly in a few hours, but that will be the case for small — tactics should work. Alas, many traders can not choose their optimal strategy for months, and we hope that with this algorithm the task will become a bit easier.
Search patterns, ideas that will generate income
As I mentioned above, the trading system in the foreign exchange market is developed only for a specific task. For example, trading of securities of companies after natural disasters, or trade a liquid currency pair at the opening of the trading session, etc. You should consider the possibility of the float, which directly affects the implementation of the strategy.
The definition of the shell of trading system
Under the shell, I consider the conditions in which the strategy construction will be implemented:
the ratio of risk and profitability;
setting of long or short stop loss;
the principle of strategy operation (for example, levels of support and resistance);
identifying entry points to the market (for example, at the intersection of indicators or simultaneous implementation of specific conditions).
All these things depend on the individual policy of the trader.
Pre-testing of the strategy
It is recommended to use large time frames. Tactics are tested on the the asset, under which it was sharpened, and on other assets to determine how you managed to cope with the task. Fixed amount of profitable and losing trades, and total profit.
If testing was unsuccessful, experiment in other time periods, change the indicators — look for all the possible errors and test the strategy again.
Trading system in the Forex market will be successful only if it got real trading examples over a long period, for example – one year. If pre-testing is 30-50 transactions, then a long is a few thousand. I advise you to try to understand the code and to transfer the strategy from a manual test mode in auto.
Evaluation of maximum drawdown
50% is too high level (if the drawdown was more than 50%, the trading system in the foreign exchange market is considered unhealthy), with the loss of 10% makes sense to raise its level, and the level of total income. Optimal level – 25-35%.
Evaluation of the overall costs of the trading system
In practice it turns out that the developed trading system in the Forex market is not suitable for real trading because of its incompatibility with the trading platform or problems with slippage. Rate the profitability of trading strategies based on spread and commissions.
Of course it is only a common algorithm, still it may help. As practice shows, the creation of successful strategies can take from 1 month to 1 year. That is why there are paid strategies that unlike the free show higher yield.