|Trading systems||What is a trading system|
A trading system is simply a group of specific rules, or parameters, that determine entry and exit points for a given equity. These points, known as signals, are often marked on a chart in real time and prompt the immediate execution of a trade.
Here are some of the most common technical analysis tools used to construct the parameters of trading systems:
Moving Averages (MA)
Often, two or more of these forms of indicators will be combined in the creation of
a rule. For example, the MA crossover system uses two moving average parameters, the long-term and the short-term, to create a rule: "buy when the short-term crosses above the long term, and sell when the opposite is true." In other cases, a rule uses only one indicator. For example, a system might have a rule that forbids any buying unless the relative strength is above a certain level. But it is a combination of all these kinds of rules that makes a trading system.
MSFT Moving Average Cross-Over System Using 5 and 20 Moving Averages
Because the success of the overall system depends on how well the rules
perform, system traders spend time optimizing in order to manage risk, increase the amount gained per trade and attain long-term stability. This is done by modifying different parameters within each rule. For example, to optimize the MA crossover system, a trader would test to see which moving averages (10-day, 30- day, etc.) work best, and then implement them. But optimization can improve results by only a small margin - its the combination of parameters used that will ultimately determine the success of a system.
Contact for more learning: webmaster@freehost7com