Building a trading system
Turning a setup into rules you can test, from entry to exit.
Start the chapter4 lessons · 2 tools
Lessons
- 01What is a trading system?A trading system is a written set of rules that decides which market you trade, when you enter, when you exit and how much you risk on each trade. Following the same rules every time makes your decisions consistent and lets you measure results, though no system wins every trade or guarantees a profit.
- 02Building your entry and exit rules.Entry and exit rules are precise when two people reading them would take the same trade at the same price. Each rule names a timeframe, a price type, a number and an order type. A complete set covers the filter, trigger, entry, stop, target, position size and a time limit, plus what to do in awkward cases.
- 03How to backtest a strategy.Backtesting means applying fixed entry and exit rules to past price data, one candle at a time, and recording every trade the rules would have taken, including costs. The result shows how the rules behaved in the past, with their win rate and worst drawdown. It cannot prove future profits, and errors like look-ahead bias inflate it.
- 04Forward testing on a demo account.Forward testing means running a trading system on live prices as they arrive, usually on a demo account, before you risk real money. It checks whether backtest results survive real spreads, slippage, missed signals and your own discipline. Use the same rules, account size and lot sizing you plan to use live, and record every trade.