1. DEFINE A MARKET & ECONOMIC CALENDAR
In this chapter, I will show you how to manage the temporality of an automated trading system. We will need to define exactly when our bot can operate the market and when it would stay inactive.
We will define the period, by the hour and by day while the bot could find an opportunity on the market.
2. IMPLEMENT MONEY MANAGEMENT
An automated trading system with a bad configuration could open a succession of entries until a fall in a margin call. Thus, it is very important to implement safety features into your bot for the purpose to decrease financial risks.
In this chapter, we going to define the position sizing and how to control the number of entries that your automated trading system will open.
3. MEASURE THE MARKET TREND
The market trend can be bullish or bearish regarding a period and a timeframe. For example, 100 periods with a 1 minutes timeframe or 20 periods with a daily timeframe, etc.
The without trend market is difficult to describe cause there is often a succession of small bull and bear markets.
In this chapter, I will compare moving averages with linear regressions with the goal to discover the best way to determine the trend of the market.
4. MARKET VOLATILITY PERCEPTION
The volatility is the parameter that best expresses the risk of an asset at a given moment. The measure of the volatility is straightforward thanks to the standard deviation. The high volatile markets are often difficult to trade thus it is preferable to avoid them.
In this chapter, I will show you how to measure the financial market volatility for the purpose to avoid too volatile markets.
5. STOP LOSS AND TARGET POSITIONING
The stop loss and target positioning is a major part of my trading style. The tactical approach focuses on profits and losses management.
Each closed entry would give profits strictly greater than losses and their success rate would be greater than 50%.
In this chapter, I will explain to you how I chose the position of my stop loss and my target.
6. PROFITS SECURING
For the sake of robustness, a strategy must be equipped with a profit securing mechanism. This mechanism’s purpose is automatically placing a sell stop order when the latent profits are greater than a certain level.
In this way, if the price is felt before reaching the initial target, the opened position will stay a winner. (except if there is a gap or a flash crash)
In this chapter, I am going to introduce you to the way to secure your la-tent profits.
7. TARGET OVERWRITING
When the market touches a ‘resistance’ as a price ending by 100 or a monthly pivot, we often see reflux. This reflux is sometimes deep and at times, the market trend goes in a reversal direction.
If your target is placed a little above a major price level, you eventually should replace it with this major price in the goal to close your entry before the reversal.
In this chapter, we going to learn how to replace a target at a resistance.
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