The most important factor in any trading system is the premise or philosophy or logic on which it is built.
The systems must be able to identify certain repetitive behaviors which are inherent to any market.
5 RULES TO IDENTIFY A STRATEGY THAT WORKS:
There are plenty of trading systems available on the internet and there are many trading systems providers.
But how do you know which ones are going to be potentially profitable?
The most important factor in any trading system is the premise or philosophy or logic on which it is built.
The systems must be able to identify certain repetitive behaviors which are inherent to any market.
The magnitude of these behaviors could vary over time but they are natural to any markets.
Better yet, you should have multiple systems that attack these behaviors...
This is what I call the Hybrid Approach !!!
Once you have understood the logic behind the system, make sure it's based on simple rules.
If there are more rules, it’s a red flag that the systems are probably over-optimized or curve fit to past data which is unlikely to work in the future.
For any system to work in the future, it must have been applied to many different market cycles over a long period of time.
It must be able to hold up in bull markets, bear markets, high volatility markets, and low volatility markets.
The strategies must have been tested on good quality historical data.
This is a very important factor in the success of any strategy.
Most of the strategies are tested on data with "Survivorship Bias"
The data contains only the currently listed companies and does not include delisted companies.
What if you bought a stock just before it went out of business?
The data with only survivors will not show this trade and boost your results
The inclusion & deletion of stocks keep on happening in Nifty 50 from time to time.
If you test on the current set of Nifty stocks, it will not be reflective of reality!
If the strategy has too few trades, it probably is curve fit and unlikely to work in the future.
The strategy is simply relying on luck. The strategy must show consistency on a large number of trades to reduce the luck factor.
These are not exhaustive but few very important guidelines in my experience to make a better decision at selecting a trading system.
All the best!
https://t.co/RezNZIUaCo
More from Hardik
On track to 5850...
As per traditional chart analysis, the breakout from the flag can extend by a distance of the flagpole which gives us the price objective of 5850 or thereabouts.
Let's see what happens!
#ApolloHospital https://t.co/jHgjR2WThe
As per traditional chart analysis, the breakout from the flag can extend by a distance of the flagpole which gives us the price objective of 5850 or thereabouts.
Let's see what happens!
#ApolloHospital https://t.co/jHgjR2WThe
Looks like a Flag to me...
— Hardik Upadhyay, CMT. (@tradingwithdyr) August 30, 2021
A flag pattern is a continuation pattern that suggests a short-term consolidation in opposite direction preceding a strong move.
A breakout above 4850 could have a rapid movement!#ApolloHospitals pic.twitter.com/q7g4enQjRY
More from Genericlearnings
For all TA lovers..
A basic and compressed learning on Fibonacci Ratios
A basic and compressed learning on Fibonacci Ratios
It's called the #Fibonacci sequence, but its origin was in India around 200 BC! Here's how you can use it in the equity market@kbbothra #BNSNPathshala #StockMarket #Nifty50 #StocksToWatch pic.twitter.com/OuGbU4DgrC
— ET NOW (@ETNOWlive) June 3, 2022
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The YouTube algorithm that I helped build in 2011 still recommends the flat earth theory by the *hundreds of millions*. This investigation by @RawStory shows some of the real-life consequences of this badly designed AI.
This spring at SxSW, @SusanWojcicki promised "Wikipedia snippets" on debated videos. But they didn't put them on flat earth videos, and instead @YouTube is promoting merchandising such as "NASA lies - Never Trust a Snake". 2/
A few example of flat earth videos that were promoted by YouTube #today:
https://t.co/TumQiX2tlj 3/
https://t.co/uAORIJ5BYX 4/
https://t.co/yOGZ0pLfHG 5/
Flat Earth conference attendees explain how they have been brainwashed by YouTube and Infowarshttps://t.co/gqZwGXPOoc
— Raw Story (@RawStory) November 18, 2018
This spring at SxSW, @SusanWojcicki promised "Wikipedia snippets" on debated videos. But they didn't put them on flat earth videos, and instead @YouTube is promoting merchandising such as "NASA lies - Never Trust a Snake". 2/
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https://t.co/yOGZ0pLfHG 5/
So the cryptocurrency industry has basically two products, one which is relatively benign and doesn't have product market fit, and one which is malignant and does. The industry has a weird superposition of understanding this fact and (strategically?) not understanding it.
The benign product is sovereign programmable money, which is historically a niche interest of folks with a relatively clustered set of beliefs about the state, the literary merit of Snow Crash, and the utility of gold to the modern economy.
This product has narrow appeal and, accordingly, is worth about as much as everything else on a 486 sitting in someone's basement is worth.
The other product is investment scams, which have approximately the best product market fit of anything produced by humans. In no age, in no country, in no city, at no level of sophistication do people consistently say "Actually I would prefer not to get money for nothing."
This product needs the exchanges like they need oxygen, because the value of it is directly tied to having payment rails to move real currency into the ecosystem and some jurisdictional and regulatory legerdemain to stay one step ahead of the banhammer.
If everyone was holding bitcoin on the old x86 in their parents basement, we would be finding a price bottom. The problem is the risk is all pooled at a few brokerages and a network of rotten exchanges with counter party risk that makes AIG circa 2008 look like a good credit.
— Greg Wester (@gwestr) November 25, 2018
The benign product is sovereign programmable money, which is historically a niche interest of folks with a relatively clustered set of beliefs about the state, the literary merit of Snow Crash, and the utility of gold to the modern economy.
This product has narrow appeal and, accordingly, is worth about as much as everything else on a 486 sitting in someone's basement is worth.
The other product is investment scams, which have approximately the best product market fit of anything produced by humans. In no age, in no country, in no city, at no level of sophistication do people consistently say "Actually I would prefer not to get money for nothing."
This product needs the exchanges like they need oxygen, because the value of it is directly tied to having payment rails to move real currency into the ecosystem and some jurisdictional and regulatory legerdemain to stay one step ahead of the banhammer.