Basic Trading System Components As mentioned in the introduction, trading systems are constructed using parameters - the groups of specific rules that generate entry and exit points for any given equity. These two strategies form the foundation on which all trading systems are built, and the markets provide the medium.
Both trend-following and countertrend trading systems adhere to four basic principles that govern the construction of any trading system.
In this second section on designing a trading system, we break down the two genres into individual components, examine the empirical decision-making process and, finally, take a look at how software has revolutionized system trading. Maximizing the percent return should be your primary objective while designing a trading system.


The system's parameters must be stable and feasible - Trading systems cannot rely on coincidence or luck!
However, beyond the basic charting of equities, there are many other powerful ways to use Sharpcharts. Empirical Decision Making A trading system requires the designer to make some empirical decisions that directly affect the system's performance - if there was no need for this decision making, everyone would be rich. All equities can be analyzed from multiple perspectives of time periods, ranging from one minute to one decade (or more). Most equities are charted on an unbroken price series - that is, the charts are continuous.


When trading futures and some other equities, however, there is an option to use actual contract data instead of continuity. We explore this further in subsequent sections that address the construction of a trading system. Software and System Trading The evolution of the computer is perhaps the greatest driving force behind system trading.



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