Let’s take a look at some of the goals you want your index futures trading system to achieve for you.First, our main goal is to build a system that lets you know the data and gives you an edge in the market.An acceptable trading system will produce any more than 55% of successful trades, but if you can get 60% or more, you can do well with your system.
How do I start creating a trading system?First, take a look at your charting software, which you use to see the index futures market you are trading in.Your chart pack typically comes with hundreds of standard technical analysis metrics that can be overwritten on your futures price chart.Trading systems don’t have to be complicated.In fact, I’ve found that most people do better with simple systems, the simpler the better.
After placing these two moving averages on our chart of the index futures market, we will simply observe when the 9-cycle moving average begins to move upwards above the 21-cycle moving average.When this happens, at the close, we can use this “signal” to tell us that we should be long the future of the index now.We can then look at the nine-period moving average and see if it goes back below 21 and USES that as a signal to exit the trade and take profits.Instead of using the exit system, however, some traders simply set profit targets after the trading location, and in any case, make a profit if the price hits the target.Technical indicators tell you when to trade, not your “gut feeling”, because the market seems to be moving fast.
You can decide which metric to use, but remember that just because your system is more complex doesn’t mean it’s better or more accurate.Keep it simple.So now, once you have an idea that you want to test, you need to start assembling a sample pool, and you can execute it perfectly with your new system, so you can see how well it performs, in other words, the percentage of trades that win.
Or, like many new traders, you can start using one of the many commercially pre-built stock index futures trading systems that have been tested for profitability.This shortens the startup process by at least a year or two, because it starts with a system with a solid history of making money.