Make Your Own Trading Model

Make Your Own Trading Model

A step-by-step, clearly defined, rule-based structure to govern the trading activities is known as a trading model.  There are many benefits associated with using a trading model to conduct transactions. If you don’t have spare time to invest in to come up with your trading model then you can use auto-robots to do the trading for you. Go through the review here to learn all about auto robots.

To build the trading model on your own, you need not possess advanced-level knowledge in trading. However, you need to have an understanding about the why and how prices move, how to capitalize the opportunities practically and where does the profit opportunities exist.

Basic steps in formulating the trading model

Step 1- Conceptualizing the trading model- As the first step, the trader has to study the historical movements of the stocks in order to identify the trends so that the concept could be created. Concepts are the result of extensive analysis of data.

Step 2- Identify the opportunities- You should identify the opportunities that are right for you or the stocks to trade. This step involves verifying concept against the historical data. You can easily download the data of stocks from different finance portals or exchange websites. After the analysis, you will be able to find the stocks that give a positive trend for a particular duration. If the positive results are more than the negative results, then you can go ahead with the concept or else you need to discard the concept and begin from step 1.

Step 3-Develop trading model- In this step, the trading model is fine-tuned and necessary variations are introduced which are based on the concept’s assessment results. You should continue verifying across the large datasets and look for more variations. Also, you can use the computer programming to help you identify the profitable trends. Your main aim should be to improve positive outcomes that will lead to more profitability. Remember that there is no such thing as a perfect trading model.

Step 4- Go live- After considering the above testing’s results and analysis you need to make the decision as to whether to go live or not by investing the real money. Once you go live using real money, it is very much important that you continue to track and assess the result. Also, you need to have a backup plan in case if things don’t go as well as planned.