7.1What Is a Trading Strategy?
- ·The components of a defined strategy
- ·Why a strategy must be testable
- ·The difference between a strategy and an opinion
A strategy is a defined set of rules describing:
- ·what to trade
- ·when to trade
- ·what constitutes a setup
- ·where to enter
- ·where to exit
- ·how much to risk
A strategy should be testable.
If it cannot be described, it cannot be tested.
'I trade Gold when it looks strong' cannot be tested. 'I trade Gold long after a break of structure and retest during the London session' can be.
Examples use historical or illustrative data only. They are not live market signals.
Write your strategy in six lines, one for each component above.
A strategy must above all be:
Risk per trade is part of the strategy definition.
- 01A strategy defines instrument, timing, setup, entry, exit and risk.
- 02Testability is mandatory.
- 03Vague descriptions produce untestable systems.
Educational content only. Nothing here is financial advice or a recommendation to trade. Trading involves risk of loss, results vary between individuals, and past performance does not indicate future results. Only capital you can afford to lose should be exposed to market risk.