System Creation

"Creating your own
system is difficult."

It is not correct to say it is difficult to create your own system rules.

In fact it is quite easy - once you have had some practice. People are put off creating their own rules because they think specialized knowledge is required - but this is not so.

But it helps a lot if you have a method to help you generate ideas.

To be of possible use, the 'rules' of a system must have what is known as a positive expectation. That means that over time, tests of the proposed rules indicate they would produce a net gain.

'Expectation' is easy to calculate and only requires knowledge of the average size of winning and losing trades and the percentage of trades that are 'winners'.

When you have a possibly useful set of rules, you must then find out if they are any good! Are they capable of meeting your trading goals?

The task now is to evaluate them and see. For this, you need to have a method. Professional traders have special methods for evaluating system rules which also bypasses the need for considering positive expectation separately.

Also, they can easily embody new rules into their trading software without doing any programming work.

Until recently, due to software inadequacy, it has been very hard for private traders to test new systems properly. This may be the reason for the mistaken belief that it is difficult to create your own rules.

But private traders should take note that this problem has been solved. They can now obtain software that enables them to install new rules easily - and test them fully in simulated live conditions.

It is recommended that anyone trading commodities should learn how to produce their own system rules, because then it becomes much easier to keep your system up to date through gradual improvement.

 

Modus Trading
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Copyright David Bromley 2006
All Rights Reserved.

 

 

 

 

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