Published on: June 21, 2024
For years, we have been hosting events like DECMA and DECNOCH, observing how trader’s expectations and attitudes have evolved. Before the pandemic, many traders attended these events seeking the elusive “holy grail” trading systems.
However, the post-pandemic era has brought a shift in mindset. Traders now understand that successful trading isn’t about throwing random darts and hoping to hit the bull’s eye—it’s a structured process. At Definedge, we are dedicated to empowering traders with a robust process in our events and Traders Nest. If you have caught the podcast with Prashant Shah and trader Ravi Shinde, you have likely grasped the importance of objective, system-based trading.
The Reality of Building Trading Systems: Is Coding Necessary?
A common question among traders is whether building a trading system is a daunting task requiring coding skills. The answer is NO.
With Definedge’s RZONE platforms, you can create sophisticated trading systems without writing a single line of code.
Revolutionary Tools at Your Fingertips
Definedge is a pioneer in the industry, offering trading systems based on unique charting methods like Point & Figure, Renko, Line Break, Ratio Chart, and Kagi. These systems are equipped with backtesting capabilities for Stocks, Commodities, and, uniquely, Mutual Funds. This innovation allows traders to test their strategies thoroughly before committing real money.
A Step-by-Step Guide to Building Your Trading System
Let’s walk through the process of creating a trading system using RZONE. Before starting with the platform, it’s beneficial to draft your system on paper, outlining each parameter clearly. This preparation will streamline your experience.
Getting Started with System Builder in RZONE
- Login to RZONE – Use your credentials to access the platform.
- Navigate to System Builder on the left menu
Create System and Define Your Parameters – Enter your trading system using chart style and specific criteria and rules.
For example, I am considering a Breakout Trading System where the high should be above 13 bars high, and the RSI should be greater than 60.
Write the Name and Description of your system.
Now Click on Add to add the parameters. In my strategy, my High should be above 13 bars high and RSI > 60.
Let’s set High criteria first.
Set the Candle as “0” as it will check the current candle. As defined, we want a high of 13 bars, so we mentioned 13 in the number of bars.
It’s time to add RSI now.
Select the criteria accordingly if your system includes a crossover of RSI over average or overbought/oversold zone.
In our strategy, we wanted an RSI above the value of 60; hence, we selected the “RSI Above Value” criteria.
The next step is very important. Please follow it properly
.
In the Expression tab below, mention the criteria correctly. We considered both conditions in this strategy and wrote them as 1 and 2.
If your system has 3 conditions that should be met, write “1 and 2 and 3”.
If your system is – High > 13 bars, RSI > 60 or MACD > 0, then you should write “1 and 2 or 3” as your system should fulfil one condition between RSI and MACD.
Your System is ready.
Before you proceed, check these 3 points – the system’s name in the left tab and the parameters and expression in the right tab.
It’s time to Create a Stop-Loss system. The Stop-Loss is the lowest low of 13 bars.
- Backtest Your System – Run backtests to evaluate the performance of your system against historical data. This step is crucial to understand how your strategy would have performed in different market conditions.
Let’s understand the step-by-step process of back-testing the system.
a. Navigate to Back Testing on the left menu.
b. For Back Testing, there are a few points to follow.
- Chart Type – Select the chart type for the system you created.
- Script or Group you want to backtest.
- Select Long, Short or Both, depending on your system. As our system is Long only, we selected “Long”
- Select “My” because the system is available in your account. We have Pre-Defined systems and a few Popular systems posted by Definedge or other users.
- Select the system you saved. We selected “Breakout Trade Setups”, as explained above.
- The next step is “Exit” criteria. Mention the exit rule and click Scan.
You can sort as the highest returns or success ratio and check the result. In the above table, we sorted as per the returns.
5. Analysing the backtesting result is where Definedge focuses. We have an in-depth analysis of the backtesting results so that you can analyse them before executing the trade.
Now, you are ready to go for a trade.
Tools like RZONE have significantly lowered the barrier to creating sophisticated, objective trading systems. You no longer need to be a coding expert to develop and implement effective trading strategies. The platforms provide a user-friendly interface that allows traders to focus on strategy rather than technical complexities.