Developing and maintaining an automated trading system that works is very difficult. There seems to be a lot of disjointed literature on the subject, but very little of it is put together into an action list that would let a newbie get started. Well, if I were starting out today, here’s what I would do.
1) Read Van Tharp’s Trade Your Way to Financial Freedom. I’ve never seen so much great information about system development offered in such a concise and low cost volume.
2) Read the Original Turtle Rules to understand the components of a complete trading system. Your system may look nothing like the Turtle System, but your system should address all the points of a complete trading system, namely:
- Markets — What to buy or sell
- Position Sizing - How much to buy or sell
- Entries - When to buy or sell
- Stops - When to get out of a losing position
- Exits - When to get out of a winning position
- Tactics — How to buy or sell
The Turtle Rules say that they are free, and yet, the website asks for a $29.95 “donation”. If the rules were truly free, I’d post them here, but I don’t want any copyright headaches.
3 ) Find a MetaTrader broker and sign up for a demo account. If you are comfortable with C language, use Metatrader 4; if you are more comfortable with EasyLanguage (Tradestation), use Metatrader 3, but realize that the number of brokers who support MT3 in live trading is small and dwindling.
4) Play with the built in MACD crossover system that comes with Metatrader and see how adding and removing things affects performance.
Above all, BE PATIENT. Do not rush into live trading with a system that has not been properly backtested and forward tested.
Nothing, absolutely nothing GUARANTEES that you will be profitable. If you are looking for a guarantee, buy Treasuries.
If you follow the steps above, you will have spent $60 or less on quality information and you will have all the information that you need to get started.