Need help developing trading system

Hi all I have already figured out the psychological aspect of my trading. My account size and the position sizes etc. The thing is I don’t know what system to use. The plan I have is to have a 1:3 trade to risk ratio that is I risk the movement of price by 1 vs 3 times my take profit. This is not my trading size but rather how price moves. Let’s say I buy into a trade price will need to move say just 1 time downwards before I get stopped out but move 3 times upwards before I make a profit. Please help me figure out which trading system to use. You see I just have a rough idea on what to do but I don’t even have a trading plan because I don’t know how to make one.

Forgive me if I’ve misunderstood, or missed something obvious, but how can you figure out the position-sizes without having decided which system to use (unless perhaps they all happen to trade with exactly the same stop-loss and trade-management)?

Sure … but are they all systems suited to that R:R ratio? Are they all proven to be about equally profitable, on that exact basis?

If not, I’d suggest allowing testing of each method/system to determine that for you? (Example: I have two little systems which are both profitable for me with much lower R:R ratios than that, but they wouldn’t be profitable at all if I tried to trade them with a TP three times the distance of their SL.)

What I’m really asking (I think) is how you came up with the “1:3 decision”? :19:

My money is on wishful thinking, it’s like me saying: the plan I have is to have a 1:73 risk/reward ratio, I just don’t know which system to use to get it.

Trade Analysis | Maximum Lots - Part 2

maryo cairo thread on free forex systems here

supply and demand trading

Hello to the O.P…

As Lexy and Baz said before me, it is not enough to ask us here to just ‘give’ you a trading system… You have to do your own testing of your system and THEN you can come here to ask questions, with data in hand…

Kate has provided you with a couple of links and more, but, again, you should find your own way first… Demo first, then live, if/when you are confident that this trading malarkey (which can be rather dull) is actually for you… Oh, and if you did go through BabyPips school, you would not need to ask us mere mortals for ideas on ‘which system’ - if I put away a Pound for every time a thread by this title got posted on BabyPips, I would be rich :wink:

Good luck…and maybe see you back here soon!

To the OP, that is something only you can figure out. Pointless of anyone telling you what works for them.

Thank you so much Pipmehappy, trading I never find dull nor malarkey. The best system was taught to me by another trader who took their time to teach me. I use supply and demand; decided to try a modified here, which my teacher is horrified at, however attempting. As for the question at hand you do not trade SD unless you have a 3 to 1 ratio.

Thanks for the replies guys. I guess i didn’t know what to ask. I mean i got overwhelmed by the number of trading systems you see out there in this forum and others. So many to choose from which one do you pick?

It’s crazy i guess. I mean i know position sizing and emotions etc are big factors but still you need a proper trading system or at least that’s what i feel because i have read on people mentioning that it’s your emotions that count and the willingness to take a loss when your system doesn’t work. Well it makes sense but let’s say your system doesn’t really work it would be pointless to keep on taking all those small losses and i guess this is where it’s confusing to me.

I notice that they tell you to develop a system according to your own personality and emotions but seriously how do you go about doing that?

GOod morning, Snake24…

Personally, and you may correct me if I am wrong, but it sounds like you could benefit from a ‘mentor’

or some sort of live interaction with other traders…

Forum member Emeraldorc, who has actually gone on to found the TradersClub earlier this year, is still

at the early stages of the live trading room, which you can find details about here:

I really value Emeraldorc’s advice and I did go to his live trading room two weekends ago - it was free

to log on and it went on all day - and although the focus was the Cable (GBP/USD), which I do not

specifically trade, there were a lot of topics covered, in a live environment… the chart on the screen

was always on, live, so that trades put on/off would be something that everyone could discuss…

So, you could give the next one a try (I am not sure when it is coming up, but you can post on that

thread and ask Emerald)…

Which broker are you with? Mine, FXCM, offers a stack of webinars and Q&A sessions through their

research arm,… A lot of them are free, so you can watch them even as a demo trader,

but the DailyFX Plus ones are only accessible with a live account (however small)…

You can also try sending a PowerBlast question to PowerTrading Radio, which will be discusses live

on Merlin’s show with his guests: Power Trading Radio - Daily Day Trading and Investing Podcasts

If you do not have any trader friends in the flesh, then all of these free resources can help you

in a more direct dialogue with people: forums can be great, but you are having to wait for replies

and you cannot have a live dialogue…

I am afraid there is no ‘holy grail’, as you know, so any system will give you losses or drawdown,

so in the end it takes time because you need to try one or two systems before settling on one, but

it is also tempting to become a ‘system hopper’, where you never commit to anyone… it is like a man/woman

going from relationship to relationship, without ever committing to anyone … in the end, fear of commitment

will not allow a person (in love as in trading) to build a future… Sure, the grass is always greener in your

neighbour’s lawn, as they say, but in the end if you do not give something (or someone) a go for a long

enough period, you will never really find out for sure how that relationship will perform over time…

So in trading, as in life, you have to commit, and by that I mean really commit, to one system for a few

months (ideally one year) to assess it over time, and more importantly, to assess how you can cope with

the discipline of not straying from your system even (and especially when) it is losing you money…

As you correctly said, snake24, and as our resident expert PipDiddy says, it is a battle won in the mind

as much as on the charts…

Good luck.

Is there a specific reason why you want to aim for 1:3 risk:reward? There’s nothing wrong with that R:R ratio, but it seems very specific. :slight_smile:

If you’re aiming for home runs, trend-following might work, although you’ll probably grab more than 1:3 with your successful “home run” trades. Personally, I found trend-following unreliable and usually aim for “singles” like 1:1 or 1:1.5, whatever the chart will give me. Just my 2c.

Ah, I see what you mean. Sorry - I slightly misunderstood your question, above. :8:

Well, for myself, I start by rejecting almost all systems based on “multiple indicators”, and then choose one which is based on logical, reasonable parameters I [I]understand[/I], that make sense to me, and which I’ve extensively back-tested and seen proven profitable [I]myself[/I], after experimenting with all its variables, and then also proven profitable over a statistically significant number of trades on “forward-testing”, initially on a demo account.

Here are two beginners’ books both of which set out good answers to that exact question (especially the first one) …

[I]Trade Your Way to Financial Freedom[/I] by Van K. Tharp
[I]Beyond Technical Analysis[/I] by Tushar S. Chande

They’re both available from Amazon and elsewhere, and neither should be expensive, compared with some trading books. I strongly advise you not to trade with real money without first giving at least these two a good, methodical read-through. It will probably save you a fortune.

But don’t try to determine your position-sizing without first selecting a system that you’ve proven, yourself, to be potentially profitable and reliable. :wink:

The reason why i want this is because i don’t want to risk high losses. In the past i didn’t trade like this but i realize that i need to try to minimize my losses but ride on my profits so the 1:3 risk to profit ratio is one way.

I read the first book already and they don’t tell you on any trading system and in fact that book is the reason why i’m relooking at everything. I have already written down my objectives and the money i have and am willing to risk but realize i need a system to actually start.

Well … he does explain in some detail (for over 100 pages, as I remember?) why and how you derive the staking from the system, surely, rather than the other way round? :33:

I suspect that somewhere along the line we’re talking a bit at cross-purposes, and I’m sorry not to have been any more helpful. :8:

I’m not suggesting that books like that set out a list of specific systems from which you choose one (though in fact I’ve found more than one from each of those books that I still trade regularly, myself, with only slight modifications to allow for their application to intraday forex-trading); rather that they might enable you either to develop a system that suits your own aspirations, availability and intentions, or to assess others according to how well they match those criteria?

Please excuse my mentioning (again) that I think selecting the trade management [I]before[/I] the system is rather putting the cart before the horse, and I don’t quite understand how that’s going to work. :15:

1000’s of ways to trade, 1000’s of ways to lose…

Said this before, I’ll say it again.

Risk is measured by preparation in the task,

What this means is, if you have no idea what your doing, You have a 50-50 chance of lossing. If you study, put in the time, practice, repetitions, over and over again, you reduce the risk.

At a point in your career, you will learn that a Stop is just a net to catch the falling knifes, ( Spikes, Whips, Spread (slippage).

And, I have to be honest, you need Screen/chart Hours. I have well over 10,000 hours, and that was a while ago, i just stopped keeping track,…

Your hard part is trying to get that 1:3, because you have to SEE or Visualize the outcome before the trade, and your not there yet.

A system has to be concert with your Time available, your hours you can trade per day,…

You like the action? Then scalp. If you have just a few minutes a day, then you need to find a system that is longer time frame based.

We dont have much information from you to figure out what MIGHT be best for YOU>

Best of Luck.