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Check out the new article: Practicing the development of trading strategies.
In this article, we will make an attempt to develop our own trading strategy. Any trading strategy must be based on some kind of statistical advantage. Moreover, this advantage should exist for a long time.
A trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets. By combining various ideas, traders can develop their own strategies to meet their specific needs and style preferences.
The number of possible trading strategies is so large that even classifying them becomes a difficult task. However, there is a certain set of elements that most of trading strategies usually include.
In addition to these elements, a trading strategy may include additional parameters. Trading strategies may have a trading time limit, for example, opening positions is allowed from 9 a.m. to 1 p.m., while entry signals outside this interval are ignored.
The main requirement for the parameters of a trading strategy is their consistency and the absence of internal contradictions. Let's say that a trader decides to use some kind of money management method. After that, the trader wants to add a trailing stop to the strategy. These two elements will contradict each other. Money management requires setting predetermined stop loss and take profit levels. However, a trailing stop can close a position before the price reaches the take profit and the resulting profit will be less than expected. To resolve this contradiction, the trader will have to either use a fixed volume of positions or remove the trailing stop.
Author: Aleksej Poljakov