In my previous post, you’ve understood the power of Systems Trading.
You discovered it allows you to…
- Become a consistently profitable trader even if you have zero trading experience
- Grow your wealth to $1,311,816 even if you have small trading capital
- Beat the markets in less than 30minutes a day
- And more…
If you’ve not read the post yet, then do it right now.
Here’s the link: Systems Trading Secrets
You’re probably wondering:
“But how do I find systematic strategies that work?”
Well, that’s what you’ll discover right now.
So read on…
How to ethically “steal” trading systems that work
A big mistake I see traders make is… they try to re-invent the wheel.
They want to develop their own trading strategies from scratch.
Sure, it could work.
But more likely than not, you’ll fail.
So now the question is… is there a better solution?
And that’s to “steal” from winning traders.
Do you want to know how?
Here’s the secret…
You read trading books and research papers.
But hey, not just any trading books because most of them are filled with fluff and it’s near impossible to validate the strategies or techniques.
Instead, you want to read trading books that reveal systematic strategies that you can back test.
You’re probably thinking:
“There are thousands of trading books out there. Where do I begin?”
Well, I’ve done the hard work for you.
Here are some books and research papers you can look into…
Mean Reversion Trading Systems – Howard Bandy
Short-term trading strategies that work – Larry and Cesar
Building Reliable Trading Systems – Keith Fitschen
Does Trend Following work on Stocks? — Cole Wilcox
Two centuries of Trend Following — M. Potters Etal
Analysis of Trend Following Systems — Jose Cruset
I know you’re tempted to start trading these systems immediately.
But wait, not so fast.
Because you never know if the trading systems really work, or not.
That’s why you must do your own “homework” to validate these trading systems.
And that’s what I’ll cover next.
How to verify if a trading system works, or not?
Well, the best thing to do is run a back test over (at least) 10 years of market data.
And during those 10 years, the market conditions should change (like uptrend, downtrend, and range.).
This way, if your trading system “survives” the back test, it has a good chance of working in the live markets.
But if it fails, then you’ve just saved yourself a ton of money and heartache.
So now the question is:
How do you back test your trading system?
Here’s what you need…
- Market data
- Back testing platform
- Code for your trading system
When you do any back testing, you must have data to work with.
This data can be as simple as the open, high, low and close (of the Daily candles).
So, where do you get your market data?
Well, you can get it free from sources like Yahoo (but I won’t suggest it because it’s prone to errors).
So, my recommendation is to purchase a data feed.
The difference between paid and free is the paid version will be checked for irregularities and errors.
So when you run with accurate data, your back test results are more reliable.
If you want a recommendation, you can look at Norgate Data or CSI Data.
Back testing platform
The next thing you need is a back testing platform to back test your strategy.
Again, there are free and paid ones available.
But I don’t recommend the free ones because of limitations like…
- You can’t back test your strategy as a portfolio
- You are limited to a few markets
- Poor reporting metrics
Get a proper back testing platform (and it’s usually paid).
If you want a recommendation, you can look at Amibroker or Right Edge.
Code for your trading system
Once you’ve defined your trading system, you need to put it into “computer language” so your back testing platform can run it.
Now if you’re familiar with coding, then you’ve got what it takes to back test a trading system successfully.
But some of you might be thinking:
“But Rayner, I don’t know how to code, HELP!”
Well don’t worry.
Because I don’t know how to do either, hah.
So here’s what I suggest:
Find someone who can code and get them to do it for you.
So, where can you find such programmers?
Just Google it.
Look what I found…
Not difficult, right?
Now at this point…
You have everything you need to get an edge in the markets.
You know where to find systematic strategies that work, market data, back testing platform, and programmers to code your trading system.
However, you might be thinking:
“I’m not confident if I can do it.”
“I don’t want to hire a programmer to back test my strategies.”
“I don’t want to spend thousands of dollars trying to figure this whole thing out.”
Well, here’s the good news…
Because over the next few days, I’ll open enrolment to The Ultimate Systems Trader.
This is my premium training program where you’ll get access to my treasure chest of systematic strategies that work.
Every strategy has been back tested for at least 10 years in different market conditions (uptrend, downtrend, and range) — so you can be confident it has an edge in the markets.
Then keep a lookout for my next email because I’ll reveal the full details with you.
But for now, here’s what I’d like to know…
Do you think systems trading can give you an edge in the markets?
Leave a comment below and share your thoughts with me.