Trading System Design: Test Your Edge

Finding a logical reason that your trades should work is the first step in coming up with a market beating strategy. After that, testing is required to be certain your idea actually works in the market because, in the end, markets are driven by emotions and logic will sometimes fail in the face of that.

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Rules for Trading

After deciding which markets and what timeframe are right for you, the next step is to come up with the rules for trading.

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Designing a Trading System: What Should You Trade

Designing a trading system is simply a series of decisions. First is deciding what edge you have over all the other players in the market. This isn’t as difficult as it sounds. Using a logical approach to the markets, any individual can develop a unique insight that lets them profit.

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Trading Systems 101

Traders buy and sell for a variety of reasons. Some traders will make decisions based upon news headlines or gut feelings. One may read that gasoline prices are at record levels and decide they have to go down, while with equal certainty another trader decides the news justifies even higher prices. These strategies rely on luck, rather than mathematical probabilities, to succeed.

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