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"In the beginning was the Word..."
We started talking about trading systems – in the last issue of the trader's diary.
There are trading systems – simple and complex. Simple systems, as I understand it, are systems associated with one/more indicators for entry, stop and profit size, money management, and that's all.
How do we build a simple system? We choose a tool; a timeframe; a certain trading idea (if the price does like this – we buy, this way – we sell, otherwise we do nothing). The job of a system trader is to strictly work out all trading signals: there is a signal – opened a deal – received a stop or profit – waiting for a signal. No signal – do nothing. Such a robot/automaton. And none: "Look at the chart and decide where the price will go."
And, yes, any vehicle can be programmed – if you know how to program in a meta-trader – or you can pay a programmer and you can explain the algorithm to him. What is a system can be turned into a program, what cannot be – not a system.
Further. The algorithm, if we came up with it – requires a correct test. A minimum of three years in history. With multiple sets of options. The purpose of the test is obvious – to check whether the system is profitable and what troubles are possible.
But as I wrote in the last article – if the market is unfavorable – only money management can help us – and even then it is limited. If we play a range on a strong trend – or vice versa. We trade the trend approach in the range – a series of losses is almost inevitable.
Therefore, it is much more correct to learn how to determine the state of the market.
Last time, we determined:
EURUSD: the range of 1.0880-1.1180.
Thus, you need to enable the range draw system.
It can be a system on one of the oscillators – stochastic, RSI – or MACD.
However – if we are based on knowledge of the state of the market – range – we can act more simply, for example:
1. We buy from 1.1000 – the goal is at least 50 points, stop at 1.0955.
2. In the case of decline to 1.0955, we buy from 1.0955, stop at 1.0910 (volume increase by 1.4 times), the target is 100 points (4-digit).
3. In the case of decline to 1.0910, we buy from 1.0910, stop at 1.0865, the target is not less than 100 points (we increase the volume once again by 1.4 times).
4. In the case of a break below 1.0880 – consider the state of the market – a trend, stop the range draw.
To be continued.
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