Alright guys this week, I’ve been a around a lot of strategy building conversations/questions and a few things of my own. Because of that I thought its only right I share my view on how to build one to suit your schedule and personality. So here is how it goes in a step by step process and a video example at the end to show some of my development of one.
Step 1 – What are you good at? What do you like?
I feel like this is pretty self explanitory but what stands out to you? Find something you are condifent in identifying at a good level and consistency and does it match your philosophy on the market. When I say philosophy it can mean many things. What do you value? This can either be structure, supply and demand, elliot waves, fibonnacci, RSI and so on. This is down to you and you build this strategy around this philosophy. For example purposes I will take structure as my main centre piece of my strategy as it is something I use and prioritise over everything else. Everything else is just an addidional confluence.
Step 2 – What time frame do I use?
This depends on your schedule and when you can conistently be at your charts. If twice a day then maybe the daily/4hr is better. If you want to daytrade on the 5/15 min then do you have 1-3 hours you can trade at the exact same time every day. Up to you end of the day.
Step 3 – Breakout, Pullback or Reversal.
Realistically these are the only 3 types you can trade. Everything you do is some sort of one of these 3 things but that is the only way you can trade. So you choose 1 of these. Pros and cons of each of course so what appeals to you? After you choose one of these you want to decide what time frame is used for what reason. You can be using multiple time frames or just 1 but you have to have a defined role for these time frames as it has to be rules based and to avoid conflict of signals.
Step 4 – Entry, Stops and Targets.
Once you have all of these into place you need to determine what type of entry to use and where this needs to occur. After that, what are your rules for target and stops. Are they structure based? Are they mechanical or fixed numbers? You decide again.
Step 5 – Play time begins
Now you have some sort of foundational rules set into to your plan it is time to play around. I highly reccommend either replay mode or doing this live analysis on the smaller time frames and try to apply what you just built. This will begin a trial and error process which the more you do the more you find out where rules need to be added. Also does it feel too aggressive or conservative? Is the Risk:Reward something you are happy with. Just remember there is a pros and cons to everything you do but you play until you get it suiting to you personally. Here is a quick example of a random strategy I just developed with a few examples of things you will notice instantly.
Step 6 – Put it all together
From this play phase you would have uncovered a lot of new rules and scenarios you might have missed on your initial build of the strategy. Now you have found some of these things out its time to put it all together in an If – Then format to make it easier for you to follow each step. Once these rules are in place and you are happy you can now go and backtest this recording the data and any other things you want. Personally I think you will find even more things once doing it properly so dont hesitate to restart adding a few or removing some of the filters you have in place. It ends as a trial and error process and it wouldn;t end until you are happy with what you have and have a postive expectancy. Live trading will also uncover more things about your strategy that you may feel uncomfortable with and can look to adjust in the future.
So there you have it guys a quick 6 step process on how to build a strategy. End of the day it is trail and error and you need to play around until it suits you and come across various possibilities until you have a rule for almost every situation that can occur. I purposly said almost becasue some things are just very rare and you might be surprised but you need to be as prepared as you can. Hope you found this valuable and can take a few things from this and be sure to follow me on social media for more tips tricks and other things along my journey.