A trading system should have...

[alex.samant]

IMHO and what has been working for me:

A. ENVIRONMENT
B. INSTANCE
C. TRIGGER
D. TRADE

A, B and C together form what we call the setup.

Environment:

-usually the market sentiment, the trend (or something else if you are not trading the trend), established by looking at a distant time frame, or even fundamental conditions


Instance:

-a clear situation that pertains to the environment, that occurs closer to the present moment, indicating a high probability of a directional move.

Trigger:

-a confirmation of the increased probability of the directional move, taking into consideration the risk management guidelines; can be an anticipation of the instance resolve or it can be a reaction to the resolve of the instance.

Trade:

-is the result of all of the above, applying trade management rules to limit risk, secure profit and aiming for a high return.

Example:

ENV: Daily trend is UP
INST: Hourly trend is UP and the is a bullish pennant in an uptrend
TRIGG: 15min price is at the central pivot point and it violates it in a rally (anticipating the pennant resolve)
TRADE: go long, set stop, trail to breakeve, exit half, let half run until there is an instance contrary to the environment.

Cheers

 

[alex.samant]

at the end of the day, i will also post a clear example, hope this trade works out )

 

[alex.samant]

i promised a chart so here it is:

unfortunately today was not the best day with all the rate announcements in EU and UK, but still, this trade managed to do it's duty at least for 2/3 of my position.

So, my bias (the environment) for today was bullish on the kiwi (although i use something else for establishing a bias, the 4hour chart is just a proxy).

London opened at the upper edge of a bullish flag in an uptrend (the instance)

What i was waiting for (the trigger) was a break of a trendline while the central pivot showed support.

That happened and i got the trade. Stop a bit below the central pivot, treailed at breakeven as soon as i hit the high of yesterday, then got out with 2/3 after almost double the risked amount and then thought i would let it run further to overhead resistance at 0.7780. unfortunately, because of low appeal of this pair during EU and UK news periods, price couldn't find anymore serious buyers and came back taking my 1/3 out at breakeven.

SO this was an example of
ENVIRONMENT | INSTANCE | TRIGGER | TRADE.

Hope it helps you in your system building.

 

[dtan1e]

able to make profit, thats all it needs to be !

 

[alex.samant]

with a bird's eye view, yes.