Trading strategy: best choice and test advice

When choosing the right trading system for you. Investors are always looking for an advantage to exploit. Finding such an advantage is similar to searching for the Holy Grail and many are the traders who spend their time jumping from one system to another, constantly searching for the “perfect system”.

If you are part of this group too, stop searching and start making money. In fact, you have to realize that every trading system will face losses and there will also be a series of such events. Such an unfortunate occurrence is always a difficult time, so you have to be mentally and financially prepared. The way to prepare is to check historical performance.

The historical performance period must be appropriate for the number of transactions and the rules of the trading system. This means that a system with many rules will need to undergo multiple backtesting trades to prove its validity. In practice, our suggestion is to make at least 50 trades per adopted rule and be very cautious about

For example, if your trading system is: “Go long when the current price is greater than the 20-day moving average. Exit when the price falls below the 20-day moving average “, there are two rules in the system just illustrated, one for entry and one for exit, which means that you should have tested historical performance with at least 100 different trades.

Another consideration is the period used for the moving average and the trading frequency. Both must suit your preferences, or you will soon be looking for some other trading system. Some investors want to use a “set and forget” trading plan, where they enter their trades and only make updates and adjustments on a weekly, monthly or yearly basis. For other traders, this approach to trading would be too boring.

The main consideration however is the return on investment, or ROI. There is no answer as to what a reasonable number might be. It depends on several factors, primarily the leverage used. For example, the least use of leverage would be to pay cash for the shares and own them outright. With leverage – sometimes used, for example, in trading currencies – the returns should be higher to offset the increased risk.

A final consideration concerns the trading frequency. Day trading would be expected to produce higher returns than a long-term buy and hold purchase , for example. Let’s assume you’ve found the right combination of risk and reward, a strategy with the trading frequency that suits your personality. Well, start your trading strategy by first making a precise plan “on paper”, because this is actually more important than the number of trades made.

how to trade the news


It is possible to restrict a priori- and quite a lot – the list of news that can have a significant impact on the market in which it is traded, and thus make life easier. In fact, a stock trader will have to worry primarily about the quarterly earnings of companies, while for him the data on retail sales will be absolutely irrelevant. A Forex trader, on the other hand, must be concerned above all with what it has to do with trading, but not with data regarding company profits. An interest rate trader will worry about the unemployment figures, but not that much about the speeches given by the head of the European Central Bank. And so on. So, the moral is that you should only focus on press releases, news,


Once you have identified the press releases and significant events for your market, there are three ways to behave: (1) Open positions before the press release, a speech, etc .: this basically means betting and therefore it is not advisable ; (2) Make sure you don’t have any trades in progress during the above events : for most short-term traders this is the best approach, because it protects you from the volatility and the “wild” and unpredictable effects that can arise; (3) Trading in a time window for which the intraday fluctuations created by the event are not significant.


If what was said certainly applies to the trader “generalist”, different is instead the speech for those who wish, on the contrary, specialize in the difficult and challenging “trading the news” ( on news trading ). In fact, news and announcements related to economic and financial data often cause short-term price movements on markets, creating opportunities that traders can exploit. For example, reports regarding corporate profits, announcements of any changes in management, rumors ( rumors) on a merger, are all events that can cause the price of a stock to vary widely – even several percentage points in a day – up or down. Therefore, it is necessary to keep an eye on both primary sources of information (press releases, news agency sites, etc.) and secondary (trading and finance sites, news, etc.) and specialized sources.