Creating a Sustainable Trading Strategy
Starting with the basics
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Building the Strategy
There are SO many levers to pull in trading.
- Entry direction
- Entry position
- Stop placement
- Sizing
- Scaling
- Target
- Trade management
Each one does something different and makes a huge impact.
Sizing for example.
One bunch of poorly sized trades on your worst trades can kill your quarter.
Stops: A misplaced stop-loss strategy can turn a profitable trade into a loser.
Entry direction: Well, go long when the market’s dropping and it ain’t gonna work…
You get the point.
The trouble is we want to adjust everything at once.
And unless they are all working, the whole thing can fall apart.
This is tough mentally, you can spend forever trying to find the combination.
Make life easy for yourself.
Today, if you aren’t getting the momentum you want, start with just trying to get direction.
Eg: “I think the market will go up over the next hour.”
Then log the result.
How much MAE, MFE, etc.
Repeat for 30 trades.
See what the results are.
If you find yourself correct the majority of the time, then you can build a strategy around it.
- You look at your MAE (maximum adverse excursion) and work out a stop level to suit.
- You look at your MFE (maximum favourable excursion) and work out a take-profit strategy to suit.
The point here is you are stripping back to basics.
Market direction.
There’s nothing more basic than that!
Get that right, then add the next layer, then the next, then the next.
I think that’s a much better way of building a consistent sustainable strategy than trying to duct tape together your existing failing one.
Worth a try?