![]() ![]() As you might expect, this kind of trading style is more popular with algorithmic trading. If the strategy isn’t well-defined, the results will be inconsistent as well. This is why it’s important to make sure that you have very specific rules in your system for when to enter or exit positions. Of course, there are still no guarantees. It can eliminate emotional decisions from trading and provide a reasonable degree of assurance that a trading system is profitable. When A and B happen at the same time, enter a trade.You could think of a simple systematic strategy as: While they have complete control over what the strategy is, the entry and exit signals are determined by the strategy. Systematic traders rely on a trading system that defines and tells them exactly when to enter and exit. Systematic trading is more applicable to our topic. It just means that the results may not be as reliable as in the other case. This, of course, doesn’t mean that if you’re a discretionary trader, you shouldn’t backtest or paper trade at all. As you’d expect, backtesting is less relevant when it comes to discretionary trading since the strategy isn’t strictly defined. It's a relatively loose and open-ended strategy, where most of the decisions are up to the trader's assessment of the conditions at hand. Are you a discretionary or a systematic trader?ĭiscretionary trading is decision-based - traders use their own judgment for when to enter and exit. You’ll need to establish what kind of trader you are. Before we start with the backtesting example, there is something you should determine. ![]()
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