Trading Method Definition(거래 방법 정의)

Trading Method Definition

거래 방법 정의

 

A trading method is a specific process and theory for approaching the financial markets in an established way to make money. A trading method brings orderliness of thought and behavior for planning and implementing a trader’s action for the philosophy behind entries and exits.거래 방법은 돈을 벌기 위해 확립된 방식으로 금융 시장에 접근하기 위한 특정 프로세스 및 이론입니다. 거래 방법은 진입 및 퇴장에 대한 철학에 대한 거래자의 행동을 계획하고 구현하기 위한 생각과 행동의 질서를 가져옵니다.

 

Examples of trading methods are trend following, reversion to the mean, and momentum trading.

In contrast to a larger overarching trading method there are also trading plans, trading strategies, and trading systems.거래 방법의 예로는 추세 추종, 평균으로의 회귀 및 모멘텀 거래가 있습니다.
더 크고 중요한 거래 방법과 달리 거래 계획, 거래 전략 및 거래 시스템도 있습니다.

 

Trading Strategies거래 전략

 

A trading strategy is the process used to enter and exit positions in a market based on quantified signals on when to buy and when to sell. A trading strategy will have a trading plan to express a methodology that defines a trader’s return goals, risk tolerance, and time frame. A successful strategy should have an edge expressed in how trades are entered and managed to maximize gains and minimize losses.거래 전략은 매수 시점과 매도 시점에 대한 정량화된 신호를 기반으로 시장에서 포지션을 진입하고 퇴출하는 데 사용되는 프로세스입니다. 거래 전략에는 거래자의 수익 목표, 위험 허용 범위 및 시간 프레임을 정의하는 방법론을 표현하는 거래 계획이 있습니다. 성공적인 전략은 이익을 최대화하고 손실을 최소화하기 위해 거래를 입력하고 관리하는 방법에서 우위를 나타내야 합니다.

 

Creating a trading strategy from beginning to end requires several steps to complete the process.

.거래 전략을 처음부터 끝까지 작성하려면 프로세스를 완료하는 데 여러 단계가 필요합니다.

 

Idea generation for possible strategies

가능한 전략에 대한 아이디어 생성.

 

Entry and exit ideas for creating profitability.

수익성 창출을 위한 진입 및 퇴장 아이디어.

Researching a sample of charts to see how the trading would have worked out.거래가 어떻게 진행되었는지 알아보기 위해 차트 샘플을 조사합니다.

 

Backtesting using software.

Optimizing signal parameters.

Evaluate win rate, risk/reward ratio, max drawdown, and returns.

Forward test through live trading.

Observe real money performance

Make any needed adjustments to position sizing and trading parameters.

Focus on any improvement that can be made to decrease losses and increase returns quantitatively.

See if the strategy fits your risk tolerance, desired screen time, stress level, and return on effort goals.

Trading Systems

A trading system is creating a larger framework for the way that your watchlist, position sizing, and signals work together as part of a bigger process to create profitability for interconnecting parts of your trading . A trading system is a set of principles and procedures for how your trading will be done; it is an organized framework or executing your method and strategy.

A trading system includes:

Watchlist

Position sizing parameters

Risk management

Trade management processes

Signals

Volatility filters

Maximum risk parameters

Chart trend identification metrics

Trading Plans

Before you can trade you must first have a trading plan. A trading plan is written while the market is closed to tell you what to do when the market is open. A trading plan tells you how to specifically execute your trading system in real time with real money. A trading plan forces discipline and consistency onto your trading by allowing you to create a framework of execution to help manage your emotions and impulses when they are activated by price action, volatility, profits, and losses.

The Components of a trading plan:

1. Entering a trade: You must know clearly at what price you plan to enter your trade. Will it be a break through resistance, a bounce off support, or a specific price, or based on indicators? It needs to be quantified.

2. Exiting a trade: At what price level will you know your trade is unlikely to work out? Loss of support, a price level, a trailing stop, or a stop loss? Know where you are getting out before you get in.

3. Stop placement: You must either have a mental stop, a stop loss entered, or a time stop.

4. Position sizing: You determine how much you are willing to risk on any one trade before you decide how many shares to trade. How much you can risk will determine how much you can buy, based on the equities price and volatility.

5. Money management parameters: Never risk more than 1% of your total capital on any one trade. (2% maximum for aggressive traders who can handle bigger drawdowns). This 1% refers to the amount of total capital you would lose if your stop loss is triggered based on your position sizing not the position size of your trade of the amount of price movement.

6. What to trade: Trade things you are comfortable with. Swing trading range bound stocks, trend trading growth stocks, or trend following commodities or currencies. Trade what you know.

7. Trading time frames: Are you a day trader, position trader, swing trader, or long term trend follower? If you are a long term trend follower, don’t get shaken out of a position in the first day by taking profits or getting scared. Know your holding period and adjust your plan accordingly.

8. Backtesting: Do not trade any method until you reviewed charts over a few years to see how you would have done. Alternatively, utilize backtesting software to analyze historical data for your system. There are also systems like CAN SLIM, The Turtles Trading System, and many Trend Following Systems. You need to begin trading knowing you have an edge.

9. Performance review: Keep a detailed record of your wins and losses. You need to be sure that your method is working in real trading. Review this after every 20 trades. Also, if you had any issues with discipline, then make notes, learn from your mistakes, and the make necessary adjustments.

10. Risk vs. Reward: Enter high probability trades where you are risking $100 to make $300, or trade a system that wins big in the long term through trend following.

Regardless of how you trade, every trader must have a trading plan.

 

 

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