There are multiple ways of developing and / or improving a trading system.
You can do it top-down: start with an idea, then test and refine it.
You can do it bottom-up: start with bits and pieces, then fit them together.
In my opinion the first approach is far superior, but let's be frank: not everybody is capable of having good ideas. It's the difference between smart working and hard working. It's the difference between trailblazers and masses.
Testing entries with fixed holding period or random exits, and testing exits with random entries are one hard working approach that may lead to a minuscule edge, if any at all. Why? Because the market doesn't behave that way. Because backtesting on any amount of past data tells you little about what's next.
In a good trading system entries and exits work synergistically. Together they yield great results, while separately tested they may fare poorly or even fail miserably. On a side note: not everybody is capable of doing proper backtesting, and probably most are not even aware of it
Money management, meaning position sizing, as well as using hard stop losses will not make by themselves a great trading system, but will improve your results, will protect your capital, and will give you consistency.
Bottom line: you need a great idea. If you're not creative enough to generate it yourself, look for one! You may not even be smart enough to recognize a good idea. Then, if you really want to trade, resign yourself to a bitter life of work hard for minimal profits. But anyway use money management and hard stops!
You can do it top-down: start with an idea, then test and refine it.
You can do it bottom-up: start with bits and pieces, then fit them together.
In my opinion the first approach is far superior, but let's be frank: not everybody is capable of having good ideas. It's the difference between smart working and hard working. It's the difference between trailblazers and masses.
Testing entries with fixed holding period or random exits, and testing exits with random entries are one hard working approach that may lead to a minuscule edge, if any at all. Why? Because the market doesn't behave that way. Because backtesting on any amount of past data tells you little about what's next.
In a good trading system entries and exits work synergistically. Together they yield great results, while separately tested they may fare poorly or even fail miserably. On a side note: not everybody is capable of doing proper backtesting, and probably most are not even aware of it
Money management, meaning position sizing, as well as using hard stop losses will not make by themselves a great trading system, but will improve your results, will protect your capital, and will give you consistency.
Bottom line: you need a great idea. If you're not creative enough to generate it yourself, look for one! You may not even be smart enough to recognize a good idea. Then, if you really want to trade, resign yourself to a bitter life of work hard for minimal profits. But anyway use money management and hard stops!
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