Create a Trading System

Last modified 16:52, 2 Nov 2012

Trading Systems

The System Builder lets users build individual Trading Systems and then use these systems to test their theories on a particular markets or market segments for securities.

Trading Systems calculate the hypothetical results of trading in a particular market strictly adhering to a predefined trading plan. The trading plan consists of a bundle of complex instructions for entering and exiting trades, these instructions are based on scans and stops. The trades performed can also be affected by user-defined duration periods for trading and/or by altering the range of markets or securities to be tested.

Each Trading System also has a user-defined trading account associated with it. The user can nominate a starting amount, as well as how much to allocate to each trade, brokerage fee for each trade, minimum account balance, and even whether trades should be entered when the balance is negative (allowing margin trading to be illustrated). During the test this account is credited and debited in the same manner as in a real trading situation.

Using the System Builder and Your SOFTWARE's plain language interface, the user puts together a set of parameters and trading rules and selects the market, quote list or set of scan results on which to test the system.

For a complete overview of the process, go to the System Testing Work Flow topic.

System Builder

The System Builder interface centers around the System Criteria tabbed page of the System Builder work page is where the Trading System’s criteria is created. Here  the user sets the entry and exit criteria for the trades. The entry is a scan and the exit can be either based on a scan's criteria or a stop.

If all the market scans and stops required for the system are already created, then the system can be built entirely in System Criteria tabbed page. However, if new market scans or stops are to be created for the Trading System, then other screens will be accessed to create the new scans and stops which will then be assembled into the final Trading System on the System Criteria tabbed page.

Go to the System Builder topic to view a description of this tabbed page.

Long, Short or Both

The first consideration is whether to create a system that will exploit trade Long or Short trades, or both.

Most equity traders will be looking at bullish strategies and therefore would only fill in the first table, Long Trade Setup - Buy to Enter / Sell to Exit, and leave the second table empty. However, if the user was interested in identifying short trading opportunities, second table, Short Trade Setup - Buy to Enter / Sell to Exit, would be completed.

Complex Trading Systems could employ both long and short settings to only include trades with characteristics of both types.

Entry / Exit Scan definition

In order for the Trading System to imitate an actual trade, it must be able to enter into a trade and then exit from it. At that point it can automatically calculate whether the trade made a gain or loss and display the results.

The Entry and Exit for each trade has two separate considerations: Signal Point and Entry Point

Signal Point

Your SOFTWARE's scanning technology is used to calculate the signal point for a trade to be entered or exited.

When all the scan criteria is met, the Trading Program will receive a signal that the trade entry or exit is valid. The exact timing of when that trade will be effected is governed by the Entry Point settings, see below.

The exit of a trade can also be determined by a Stop setting. These are different from scans and are only used to exit a trade, see below.

If the scans or stops to be used in the System have been previously created, click the Select button to open the Select Market Scan dialog box. This dialog box contains all previously saved Market Scans, organized into groups. Select a scan to populate the Entry or Exit scan definition fields.

To create an entirely new scan for the Trading System, click the Select button to open the Select Market Scan dialog box but the click on the New button on the right margin of the dialog box. A Scan's criteria definition work page will open,. It is very similar to the usual Market Scan Search Criteria definition page except that the scope of the scan is not defined (this will be done further down on the System Criteria tabbed page, see below).

Entry Point

Once the entry or exit scan criteria is met at the signal point, the actual timing of the purchase or sale can be specified by the user.

Often the closing price is used in the scan criteria to determine the signal point. In such a case, the closing price is only known when the market closes, therefore the entry or exit day will have to be at least the next subsequent trading period. Users can also set the entry time to more than one trading period, and users can put conditions on the entry/exit price level.

These entry/exit time and price levels are entered using the Entry Criteria or Exit Criteria dialog boxes.

Stops definition

Stops are similar to scans instead of relying on Your SOFTWARE's scanning technology, the stop settings are based on tradition market orders similar to the orders used in actual trading.

These settings are not based on scan technology, but are defined separately on the special System Stops work page.

The criteria is unique to stops, whereas scan criteria is also used in Alerts, Charts, etc.

Scope, Timing and Trading Account Settings

The scope for each test, both in terms of the array of securities to be included in the test and the time-frame over which the test will be conducted, can be specified in the System Test section.

To be completely realistic, a designated amount of available funds, and money management rules, must also be included in the Trading System. These details are set in set in the Money Management & Portfolio Settings section at the bottom of the work page.

Save the Trading System

After the Trading System criteria has been selected, or created, and the timing or levels of the entry or exit adjusted, the Trading System will be saved are referenced by the name selected when the new trading system was started.

All Trading Systems are saved to the Select Trading System dialog box. Users can create groups and manage their Trading Systems using standard List Selection dialog box functionality.

Save As..

If you are editing an existing System Test, but want to save the original, first click Clone Trading System in its drop-down Action Menu.

This is similar to using the familiar windows Save As.. functionality. A dialog box will open requesting the user to enter a new Trading System Name. The changes subsequently made will be saved for that Trading System, while the original Trading System will remain unchanged.

Run System Tests based on the Trading System

The Trading System can now be used to run individual System Tests.

From the System Builder work page’s function bar, select Start to run the System Test.

Details of all the trades triggered by the test will appear dynamically as the test is run in the table on the Trade Listing tabbed page, and a summary of the results will be compiled on the Performance Summary tabbed page..

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