The trading system is a manual to guide trading, which clearly stipulates what actions should be performed under what circumstances, ensuring that traders' operations are in accordance with rules and remain consistent, so as to give full play to the advantages of probability.
A trading manual should at least contain the following parts:
technical level:
1. Entry Logic
2. Exit logic
3. Stop loss logic
4. Logic of adding positions
5. Position calculation
Execution level:
1. Trading time period
2. Trading software or app
3. Standard transaction process
4. Daily routine
5. Re-opening regulations
Cognitive level:
1. Theoretical knowledge that the trading system relies on
2. The nature of market operation
3. The mechanism of profitable trading
Psychological level:
1. How to overcome laziness
2. How to deal with continuous stop losses
Each of the above parts needs time to be considered, and a large amount of historical data needs to be used for backtesting.
Backtesting is a means of testing the performance of the system. It is necessary to backtest at least two rounds of bull and bear markets, see the maximum retracement of the system, and draw a capital curve. In this process, you can gradually build up confidence in the system, and then build up confidence in trading profits, so as to maintain a stable trading mentality.
