What Is a Trading System?

A trading system is simply a group of specific rules, or parameters, that determine entry and exit
points for your trade. These points, known as signals, are often marked on a chart in real time
and will prompt you to pull the trigger.
Here are some of the most common tools used to construct a trading system-
1. Chart Patterns
2. Moving Averages
3. Stochastics
4. Oscillators
5. Relative Strength
6. Bollinger Bands
7. Elliott Wave

Often, two or more of these forms of indicators will be combined in the creation of a rule. For
example, the MA crossover system uses two moving average parameters, the long-term and the
short-term, to create a rule.

Advantages
So, why might you want to adopt a trading system?

· It takes all emotion out of trading - Emotion is often cited as one of the biggest flaws of
individual investors. By cutting down on these human inefficiencies, system traders can
increase profits. Apart from going through lot of strategies in this book so that you can
construct your own Trading System, I am also devoting lot of space in psychology of
trading, without which a trader can simply not succeed.

· It can save a lot of time - Once an effective system is developed and optimised, there is
little to no effort necessary on the part of the trader. Computers are often used to
automate the signal generation.
Developing an effective trading system is by no means an easy task. It requires a solid understanding of the many parameters available, the ability to make realistic assumptions, and
the time and dedication to develop the system. However, if developed and deployed properly, a
trading system can yield many advantages. It can increase efficiency, free up-time and, most
importantly, increase your profits.