Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

Trading System Setup from Baby Pips

1 min read

 
Here is a Simple Example for the Trading system setup to Backtest
 
Trading System Requirements

Trade on daily chart (swing trading)
5 EMA applied to the close
10 EMA applied to the close
Stochastic (10,3,3)
RSI (14)

Trading Rules
Stop Loss = 2-3%

Entry RulesEnter long if:
The 5 EMA crosses above the 10 EMA and both stochastic lines are heading up (do not enter if the stochastic lines are already in the overbought territory)
RSI is greater than 50

For the above trading system I scanned using my Iris software where
iam able to get the followig results

NSE Stocks

GAIL(417)
HINDUNILVR(250)
ONGC CORP.(1060)

NSE F&O Stocks

ALLHABAD BNK(64.80)
CUMMINSIND(310)
EDUCOMP(3690)
FEDERAL BANK(222)
GAIL(417)
GTOFFSHORE(524)
HINDUNILVR(250)
ONGC CORP.(1060)

Exit Rules

Exit when the 5 EMA crosses the 10 EMA in the opposite direction of your trade OR if RSI crosses back to 50

Good to backtrack at this time to know about the expectation of profitablility To know more about the trading system visit
http://www.babypips.com/school/can_you_handle_the_truth.html

 
Few Facts from Trading Babypips

Your trading system should attempt to accomplish 2 goals:

-Be able to identify a trend as early as possible
-Be able to find ways to avoid whipsaws (confirm your trend)

If it is profitable, then you trade your system live on a demo account for at least 2 months. This will help you get an idea of how you would trade your system when the market is moving. It is a lot different trading live than manually backtesting.

Once you’ve demo traded your system for at least 2 months and you are still profitable, you are then ready to trade your system live with real money. However, you must always remember to stick to your rules no matter what!

 
There are 6 steps to developing your system:

Find your timeframe
Find indicators to help you identify trends early
Find indicators to help you avoid whipsaws and confirm your trend
Define your risk
Define your entry and exit
Write your trading system rules down and ALWAYS stick to those rules!

There are 3 phases to testing your system:

Back test- go back and time and move your chart forward one candle at a time. Trade your system according to its rules and record your trades to see if it ends up being profitable.If it is profitable, then you trade your system live on a demo account for at least 2 months. This will help you get an idea of how you would trade your system when the market is moving. It is a lot different trading live than manually back testing.
Once you’ve demo traded your system for at least 2 months and you are still profitable, you are then ready to trade your system live with real money. However, you must always remember to stick to your rules no matter what!
 
YOU MUST ALWAYS STICK TO YOUR TRADING SYSTEM RULES!

If you have tested your system thoroughly through back testing and by trading it live on a demo for at least 2 months, then you should feel confident enough to know that as long as you follow your rules, you will end up profitable in the long run.

Trust your system and trust yourself!

 

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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