About building intraday trading systems

Master Class: Training in Internet Trading and Stock Exchanges

Most trading systemsthat require your constant involvement, or what are called intraday TSIn our opinion, we believe that certain methods should be applied. Such methods include timely "breakeven"accounting the current direction of the local trendas well as an intelligent choice of the potential Profit/Loss ratio.

Let's see it in practice

These aspects will be discussed in our article. Without unnecessary descriptions of well-known concepts, we propose to make sure of their importance on the example of a specific trading system - let's call it Cable intraday. The rules for entering and exiting the market on this system are quite simple and are based on the breakdown of the local maximum/minimum after the opening of the European trading session, which were formed during the night.

Figure 1 shows the chart of profitability of this trading system for 2009, but the result is shown without applying some "tricks", which will be discussed below. By and large, the direction of market entry is random, because, first of all, the local trend is not taken into account and the entry is made at the first directional movement at opening European session.

At this stage, the system looks like neutral and has an equal ratio of profitable and losing trades, the number of consecutive wins and losses, as well as the profitability coefficient equal to one. Nevertheless, the maximum drawdown almost leads to ruin.

Figure 1. Return on the Cable intraday system in the simple option for 2009.

Here are the main performance indicators of the system:

 

Cable intraday trading strategy using MA

The following example shows a graph of system returns (see Figure 2), but using the of the moving average filterwhich is necessary to avoid entering against the local trend.

Figure 2. System profitability using moving average.

The main performance indicators of the proposed system:

 

 

As we can see from the results, the TS begins to bring some income, although the number of deals is decreasing.

Cable intraday trading strategy using MA and correct profit/loss ratio

Without going into speculation as to what it should be. potential gain/loss ratioLet us show the result of the test (see Fig. 3). Trend filter in the form of moving average leave it.

Fig. 3. System profitability using Profit/Loss ratio of 2.75 to 1.

Key performance indicators of the system, as supplemented:

 

 

Filters significantly reduced the number of deals. In addition, profitable positions become less in the ratio of approximately 3 to 1, but the profitability of the system increases dramatically.

Cable intraday trading strategy using MA, proper profit/loss ratio and breakeven exit

We achieve the best return value when we add the last component to the system - the coming out in Breakeven (see Fig. 4). This principle works as follows - when a certain number of profit points is reached, StopLoss is moved to the position opening point without further modifications.

Fig. 4. Adding the "exit to breakeven" component to the system.

Key performance indicators of the resulting system:

 

 

Net profit increased again, as well as other profit indicators. As you can see, working on trading strategy filters can be extremely useful. We advise you to turn to this activity more often when you are in search of your Grail.

Hopefully, these uncomplicated studies will help the reader in improving the profitability of their own trading system.