Category: Trading Systems

The SQN ratio (System Quality Number)

Introduced by Van Tharp in 2008 in his book The Definitive Guide to Position Sizing, the System Quality Number, abbreviated as SQN, is an indicator designed to evaluate or measure the performance of a trading system or strategy. Subsequently, some variants and uses of the original formula have emerged that I consider very interesting; in particular to obtain sets of … Read more

The win rate in Forex

by rcanessa

The win rate is a popular performance indicator used in Forex trading to measure the success of a trading system or strategy. The win rate is the percentage of winning trades compared to the total number of trades executed over a specified period. A high win rate is often considered an essential factor for profitable trading, but there are other … Read more

Recovery Factor in Trading

by rcanessa

What is the recovery factor? The recovery factor is an important indicator of the health of a trading system, which is calculated as the ratio of absolute profit to maximum drawdown. The recovery factor is usually measured in points or percentages. This indicator gives the trader an idea of the extent to which the total profit of the strategy exceeds … Read more

Trading System with Three Bars and a Stochastic for S&P 500

by rcanessa

The trading strategy that we are going to present below was initially created to trade the S&P 500 index, but it can also be applied in other markets such as Forex, since it is based on price action and technical trading signals. In this section, we present a trading technique developed and used to trade the S&P 500 stock index, … Read more

Chande Oscillator and RSI Trading System

by rcanessa

This is a simple trading system that looks for overbought and oversold conditions in the price to enter the market, so it works best in non-trending markets, but still offers the ability to build an equity curve that grows positively and constant. It is based on the use of two-oscillator indicators, the RSI and the Chande oscillator, which are quite … Read more

Forex Trading System Scalping Gold

by rcanessa

In this article, we are going to introduce a scalping trading system designed for trading spot Forex and precious metals which can be quite profitable if the trader follows the rules carefully. This system is based on custom technical indicators for Metatrader 4, so unfortunately it can only be used on this trading platform. Firstly, it uses a trend indicator … Read more

Intraday Trading System Using Moving Averages and Stochastic

by rcanessa

This is quite simple intraday trading system for 15 minutes candlestick charts which is based on exponential moving averages (EMA) and the stochastic oscillator. The rules of this strategy are very simple as we shall see below: This trading system is specifically designed for intraday trading. For this reason all open positions using this technique should be closed at the … Read more

How to calculate the mathematical expectation of a trading system

by rcanessa

Calculating the mathematical expectation of a trading system is one of the first things that should be done to know if the system is capable of making money in the long term. Having a positive mathematical expectation is an indispensable condition that any moderately reliable system must meet.

The mathematical expectation measures the amount that is expected to be won or lost on average for each trade we do. For its calculation to be reliable, it is best that we take into account as many trades as possible.

How to Measure a Trading System? – Ratios to assess your performance and risk

by rcanessa

When you design a trading system, or you are looking to buy an automatic robot on the market, you must make decisions according to your preferences. The first thing you should ask yourself is: what am I looking for?

It is clear that you are looking to earn a lot of money, yes… this is what we all seek. But after a few losses and disappointments you learn that in Forex and other markets there are no magic methods and that the perfect trading system does not exist.

So, the right question is: how can you evaluate and compare different trading systems according to their risk level and potential benefit to know if they are viable for your use?

In this article we are going to review different statistical metrics to assess the performance of an investment system.

Trading System Based on 4 EMA Crossover

by rcanessa

The trading strategy that we present below is a system based on the crossover of 4 exponential moving averages (EMA) of 5, 10, 20 and 50 periods. In this sense, it is no different from other similar strategies, but includes indicators such as the RSI and stochastic oscillator to measure market momentum, which allows the trader to confirm the reliability of the crosses. We should recall that in trading systems based on moving averages crossies false signals may occur and therefore it is important to employ means for filtering signals.This system also includes a custom indicator for Metatrader 4 (EMA/EMA Cross Indicator) which serves to signal EMA crossings.

The system and its rules are quite simple as discussed below. As always we recommend trying the strategy on a demo account before risking real money.

+ More