What is a Trading System?
A Trading System is the combination of trading rules that when followed will allow a trader to consistently make a profit. A Trading system is formed from the 5 components below.
Average percent of winning trades
Average gain per winning trade
Amount used per trade
Average amount of round trip trades made within a certain time period.
Average dollar amount gained per chosen time period
To begin creating your trading system it is first important to decide what your winning trade percentage will be.
In order to do this we assume that 50% of our trades will be winners and 50% of our trades will be losers. We assume 50% because 50% represents average results and as much as we would like to assume success it is best to prepare for typical situations, and to not count on exceptions.