How to Build a Trading Strategy

Its always going to be easier to copy the trading strategy of someone else when learning to trade. If they are making money from it then surely you can too, right? I highly recommend learning a strategy from a sucessful trader when first starting out, however as you start to learn more about the markets and the way that they move, its important to personalise your trading plan to suit the way you like the trade and the times you would like to trade. Creating your own trading strategy will help you maximise profits. This will allow you to become a better trader and be sustainable for the long term

Why Should I personalise my trading strategy?
1. Sustainability
Like any business, you can’t be static in trading. If you don’t grow and develop your trading system, like any business, you will fall behind the pack. Your edge may not be profitable forever the way you currently trade it, and is something you will need to continue tweaking and modifying to be sustainable in the long term. I call this edge decay. Creating your own trading strategy will minimise the edge decay over time and help you to adapt with the changes to the market.

2. Personality
Traders have different personalities. Different personalities suit different trading styles better. Whether it be because one strategy is more fundamental based, or technically based. Or one using indicators and one uses price action. As you learn more about the market there are going to be certain tools which you understand better. This will have an impact on your trading results.

An example is that I have never been a fan of using indicators. I once tried using a trading strategy by a trader called NoNonsenceForex. His strategies seem to be profitable from alot of the people within his community, and I spent days backtesting different trading strategies. However when it came to the application of the strategies I found that I didn’t understand what the indicators actually did, which made me doubt the system and had a negative impact on my trading. I then ditched the system purely because I couldn’t imagine myself actually trading this way. Obviously, I want to make money from trading and understand that if it was a proper system I should have stuck with it, however if I cant trade it long term, understand what I am actually doing, and be able to put the right effort in to money manage properly, than whats the point. By testing this system I learnt that I understand pure price action better and have found profitable strategies which use price action that I love studying and modifying and backtesting.

3. Performance
Although the system may be profitable, there may be tweaks which can be made to enhance the performance of the system. Not everyone is perfect. Everyone has had different paths to learn their trading skills. You may have learnt a skill from something you were taught, learnt or read that you can apply to a particular system which makes it perform better. An example of this could be through applying a seperate indicator or pattern or skill you have learnt to an existing system and testing to see whether it has any affect on the profitability.