Building your own Trading

System
● Building a Trading system is a very broad topic, The idea for this engage
is to help new and even experienced traders be more organised in how
they approach their trading and to set the framework for developing a
set of rules or principles to achieve their goals.

● Trading Systems: What & Why

- What is a trading system?

In short, a trading system is a set of rules or principles that governs a

trader’s overall approach to trading any financial markets.

A trading system will therefore outline what types of trades a trader can
take, the markets they may engage in, specific setups/structures that
trades may be premised on, risk management, rules around times of day
or trading sessions, trade management, and so on. The list is not short.
● Why bother with a trading system?

A good trading system defines the conditions under which a trader is most
likely to emerge profitable and outlines how to engage those conditions.

A trading system, once complete, can outline what those structures look like,
when and where they form, and how to trade around them (as well as when to
avoid them).

Without a trading system, how can a trader even know if what they are doing
is working or has a chance of being profitable? It becomes very difficult to
get any meaningful data or make adjustments if a trader’s ‘plan’ is not
working.

Put simply: a disorganised trader is unlikely to be a profitable trader. Think of

creating a trading system as getting serious and organised about trading.
 ● Building a Trading system Foundation

For new traders who have no idea where to start, as well as to intermediate
traders who have wasted a lot of time on things that doesn’t work. The benefit
Building a Trading system Foundation is that you don’t have to (re)invent
anything and, if you choose the right sources, you’re building on a sound
foundation of trading principles. but any decent critical thinking skills will
usually lead you in the right direction.

● Things to note for Trading system Foundation

- A trading system outlines aspects of a trader’s approach to trading with
varying scope and rigidity.

- Having a trading system is beneficial because a systematic and organised

approach to trading is likely to lead to better outcomes.

- Trading systems can be based on one’s personal experience and existing

approach to trading assuming it’s profitable or based on principles derived
from the teachings of other traders with the aim of refinement and
personalisation over time).
 Steps to Build a Trading System

1. What kind of trader am I/what is my style?

This doesn’t need to be complicated or no need to classify yourself using

some rigid and mutually exclusive category like scalper/swing
trader/position trader etc.
The idea is to roughly describe what kind of trading appeals (or works) to
you, the time frames and trade durations you’re comfortable with, and so
on.

For example: A trader describes himself as an intraday swing-ish directional

trader. He trades using support/resistance. enter at turning points with
tightly-defined risk. Trade from one level to another. Trades setups that
usually quickly tells whether he/her is right or wrong.

That’s what works for that particular trader. You might be completely
different. You may be a trend trader who’s not terribly concerned with exact
entry points and you might use an indicator suite to tell you when to
enter/exit. You might not care about turning points and may just want to
catch the meat of the move; happily holding a position for weeks/months
doing so.
 Steps to Build a Trading System

● points you may want to consider when describing yourself and your style:

1. Which time frames work best for you?

2. Are you able to build and hold positions for extended periods of time?

3. Can you handle being in an underwater trade for days/weeks in the

expectation of catching a larger trend? Or do you prefer jumping in/out of
the market more frequently based on specific intraday structures?

4. How many trades can you take without going full wannabe scalper
degenerate mode? Can you be disciplined with intraday trading or need
you restrict yourself to higher time frames?

I am sure you will get some idea about you what kind of trader are you/what is
your style from this pointers.
 Steps to Build a Trading System

● Risk
Risk is a massive topic. I recommend starting by watching my risk management
video
https://www.youtube.com/watch?v=ofwtsc20hOY

Risk is also one one of the most important topics. There’s little point in talking
about entry techniques, trade management, and so on if a single trade or
several trades blow up your account.

It’s important to get this right.

Here are some factors that a Risk section of a trading system might consider:
 Steps to Build a Trading System

1. How much capital are you comfortable allocating to active trading? Would
you be able to stomach, financially and psychologically, losing (nearly) all of
it?
2. What’s your baseline risk per trade (in nominal or % of trading balance
terms)? What factors, if any, adjust this number up/down
e.g. setup quality, winning streaks, losing streaks, et cetera?
3. How do you respond to drawdown? How about consecutive losing trades?
Do you adjust your risk per trade? The types of trades you take? Do nothing
at all?
4. Are you a higher win rate/lower R:R trader or lower win rate/higher R:R
trader? Can your win rate handle the R:R of the setups you’re taking on
average/vice versa?
5. What’re your risk limits across different time spans? What’s your session risk
limit? What’s your daily/weekly/monthly risk limit?

● This should help you build a solid foundation.

Tip: 0.5–1% risk per trade on high quality setups offering at least 2:1
Reward:Risk under reasonable conditions provide a decent starting point.
 Steps to Build a Trading System

● Entry & Exit

Trade entry is an equally important section — it dictates the conditions under

which to put your hard-earned money at risk for a trade.

This is also one of the most personalisable sections. Some traders prefer really
rigid and objective entry techniques whereas others just need a few factors to
look right before stepping in.

There’s no ‘right’ way per se, but here are some factors that an Entry section of
a trading system might consider:

1. What do you have to see in your analysis to take a trade/consider a

setup? Examples: S/R level, cluster/consolidation, chart pattern, price
closing above/below a certain Moving Average or other value, and so on.
It’s worth being strict and selective with this element.
2. What are the defining characteristics of the structures that you trade?
Could you sketch out your ideal setup in Paint and identify it on a price
chart?
3. What time frames will you use to identify (and further refine) the structures you
trade? Is every setup tradable across all time frames? Does a structure need to
be visible on a certain (high) time frame in order to be tradable?

4. What’s the entry trigger once/if price arrives at the structure you want to
trade? Is it a limit order or market order? If the former, which specific part of the
structure do you use to place your order?

5. How do you ascertain where to exit the trade? Is the exit ‘built-in’ to your entry
structure e.g. from one side of the range to the other, or is it discretionary?
Which structures do you typically target for exits?

this section can be extend for far long. There are dozens of nuances that a good
trading system can account for. It’s best that you don’t overwhelm yourself at
this stage — the basics are covered.
● Trade Management

one of the hardest parts of trading is managing the position once it’s open
and before it has hit either your stop loss or take profit.
Overtrading, getting out early right before price goes to target without you,
lazily moving your stop to break-even only to be taken out before price
moves to target and so on are all hallmarks of bad trade management
that’ll cost your account.
Here are some factors that a Trade Management section of a trading
system might consider:

1. Do you manage trades at all or do you leave your setup to play out
according to predetermined parameters? Do certain setups require more
active management e.g. big swing trade positions compared to others e.g.
level-to-level from entry to trouble area?
2. What time frame do you use to manage trades? How does it correspond to
the time frame of the setup you’re trading? For example, would you manage
a Weekly setup on the H1?
3. Under what conditions, if any, do you move your stop? Can you move your
stop to increase your risk as well as to reduce it?

4. Under what conditions, if any, do you move your take profit for the trade?
What does the market need to do/how must price behave for you to cut the
trade early or to let it run further than originally planned?

5. Are you allowed to either pyramid or average down entries? What needs to
happen to warrant such an action?

The important thing is that you’re meticulous in how you record your trades; the
best hints about management will be derived from your trading journal.

And thats the final point for todays engage, “Trading Journal”

Keep track of your each trade.

 ● “Trading Journal”

One thing that should be very clear is that a good trading system cannot come
to exist without good journaling habits.

By journaling I simply mean keeping a record of your trades.

If you’re just starting out and want something lighter and more manageable to
build a habit of record-keeping, just use this quick template:
Trade Journal Template for Beginners 📓

Time & Date

Screenshot of Setup
Direction
Risk %
Size (Risk Amount)
Setup Name/Reason for Entry
Risk:Reward
Entry Price
Stop Loss Price
Take Profit Price:
Did I Trade my Plan: (Yes/No)
Trade Management Notes: (e.g. moving stop, cutting some before target)
Results: (Equity % and R)
Emotions when taking the trade:
Feedback/notes to self:
What you’ll notice over time are subtle nuances in your trading.

You might perform better on certain days of the week compared to others. You
might excel in certain sessions compared to others.
You may discover seasonal tendencies i.e. longer time spans where you trade
well/trade poorly.
You may discover that certain setups form more frequently and play out more
often in certain instruments/session times/days of the week than others.
You may discover that certain setups have a much higher expectancy and can
justify a higher risk per trade compared to others.

The possibilities are endless and can, cumulatively, make a big difference to
your account.
Thank You.