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In trading, decisions are very important and can easily be influenced by emotion; building a trading strategy can not only reduce emotional aspect of trading, it can also give you more confidence in your decisions and at the same time lead to wiser and better investment decisions. Whether you are a short term (day trading) or long term trader, use technical analysis or fundamental analysis, creating trading strategies is an important step toward becoming a successful trader.
The central part of a trading strategy or trading system is what is called the trading rules. These rules are of different types: buy, sell, short and cover rules. For example, buy rules tell the trader whether to buy a stock or security.
Another very important benefit of developing a trading strategy is the fact that it can be easily backtested on historical data and thus the trader knows whether this trading strategy had been profitable in the past or not; in the former case, this also gives the trader more confidence in his strategy. Even though profitable backtesting result is no guarantee of future performance, the fact that a trading strategy has worked in the past is very important.
How to create trading strategies:
The process of creating a trading strategy varies largely from a trader to another. QuantShare Trading Software provides you with all the tools and plug-ins to create from scratch simple and advanced trading strategies.
As we already said, the main component of a trading system is its set of trading rules.
The Rules Analyzer is the perfect tool to begin with. It allows you to create, analyze and backtest simple and combinations of trading rules (using masks tool) and see how varying one parameter impacts the trading strategy performance.
The rules can be created from custom databases data or from +300 already available indicators (Much more are available in the sharing server, technical analysis and fundamental analysis rules) .
With the Genetic Algorithm plug-in, you can add hundreds and thousands of trading rules and let the artificial intelligence tool picks and chooses the best set of rules.
Once a combination of rules has been selected, you can add these to a trading strategy using the simulator tool. The next step would be to update your trading strategy's settings such as the number of maximum positions, the stop rules, the money management rules...
After backtesting your trading strategy, the simulation report show you exactly how this strategy would have behaved in the past. More than 50 metrics are displayed and of course you can create your own trading metrics.
We are not done yet; the Genetic Algorithm or PBIL algorithm can also be applied to a trading strategy to optimize rules' parameters, capital settings, money management variables...
Still not done, there are also the composite/index builder, the ranking system tool, the neural network prediction tool (You can easily add neural network indicators as rules in your trading strategies), the pivot table tool...
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