How To Automate Your Own Auto Trading System Stocks, Futures, Forex (No programming required)

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Meryl Waters
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1 How To Automate Your Own Auto Trading System Stocks, Futures, Forex (No programming required) by In this Guide to Understanding Trading System Development, You ll Learn: 1. The 3 Primary Steps that Make a Great Trading System 2. The 3 Common Misconceptions Regarding System Trading 3. The 7 imperative steps that must be followed, when creating your own trading system. 4. How to avoid the major pitfalls of creating and executing a trading system. The 3 Primary Steps that Make a Great Trading System This getting started guide is intended to help you determine the proper steps necessary to get good results from your Track n Trade, Autopilot, system creation software. It should be noted, that the Track n Trade Autopilot is not a trading system in itself, it is a system creation tool, used by traders to create systems, that help them better execute their own trading plans. A trading system is generally comprised of three distinct steps: 1. Trigger: The trigger is an event that tells me it s time to either buy, or sell a specific market, at a specific price and time. Triggers consist of hundreds of different method and methodologies, and you will find that 90% of trader s efforts seem to be spent in this one area of interest, since the common belief is that if you can obtain the perfect entry, the rest is profit, and easy to manage. (Personally, I beg to differ.) Triggers come in many forms, but the Autopilot specifically uses oscillating indicators, that have been designed to throw buy/sell arrows. The Autopilot uses these buy/sell triggers to enter and exit the market. 2. Entry method:

2 Now that we have a trigger, how are we going to enter the market? The Track n Trade Autopilot has several methods for market entry. The most common method is of course the Market Order, which executes a position within the market as soon as an arrow from our trigger is received. You can also use stop entry and limit orders for entering the market. Each order comes with it s own set of benefits, which are beyond the scope of this document, but suffice it to say, that each entry method is handled by the Track n Trade Autopilot with exact precision. The stop order, is primarily used to wait for a confirmation of the market to move in the direction of the buy/sell signal, while the Limit entry orders does just the opposite, waiting for the market to perform a slight pull back before entering the market. Both entry types come with their own advantages, and disadvantages. 3. Exit method: Getting into a market is easy, getting out with a profit is the real trick of the trade. Once we are in the market, we must protect ourselves against the market moving against our entry position, as well as possibly setting a profit taking target price, by utilizing Limit Orders. Most successful traders use a configuration of both types of orders for maximum protections as well as profit taking. The Track n Trade Autopilot has a very sophisticated set of exit methods, everything from mathematically calculated auto trailing stops, to jump stops, to stops based on counting and measuring areas of support and resistance. The Autopilot can even manage your stops in a way that will have them trail to a specific price level, break even, and then stop trailing, protecting your position from any downside backslide in price. 4. Filters: The Track n Trade Autopilot contains several market filters; filters that have been designed for both entry as well as exit strategies. Entry filters are used to keep a trader from entering a market that is either moving too fast, or too slow. Both filters are available for your use. There are also exit filters; advanced filters that will exit your position if the market is again, moving too slow, or has moved into a profitable state in a rather quick fashion, and to a point where we might just want to grab a quick profit and exit.

3 The 3 Top Common Misconceptions Regarding System Trading Many new traders have a belief that there is someone out there who has a trading system that is so effective, and so powerful, that all they have to do is flick it on, kick back, and live off the spoils of their system. This myth is generally perpetuated by slick marketing campaigns, Internet marketing gurus, who have never traded a day in their life, or anti Wall Street journalists, who believe that everyone who day trades, or trades their own money, is somehow the scum of the earth, and should be shot. As with most things, the truth lies somewhere in between. No, day traders, and speculators, those individuals who want to trade their own money, are not the scum of the earth, and should not be taken out and shot, or hung in the town square, but building a successful trading system that one can just flick a switch, kick back, and become rich beyond their wildest dreams also only exist in the minds of slick marketers. This brings us to the truth, and therefore those of us who are actually in this business, and treat trading as a career, and who actually want to help real people solve real problems, become the naysayers, the one s who keep saying, trading is hard, it requires technique, education, confidence, skill, and proper tools. The fact is, nobody wants to be the naysayer, nobody wants to be seen as the guy who s running around pissing on everyone s campfire, nobody wants to be put in the position of dashing peoples hopes, but when you see something being presented to you, especially in the financial industry, that is less that pure glamour, with money falling from the sky, and cash growing on trees, and that it is something that actually requires hard work, concentration, and education, you re probably getting a bit closer to the actual truth of the matter. The primary three myths that have been perpetuated, and that I would like to either debunk here, or at least shed some additional light upon are: 1. One system can be successful during any and all market timeframes 2. One system can be successful trading any and all markets what so ever 3. A successful trading system must be extremely complex. 4. Someone out there is making money hand over fist with a trading system, and their just not sharing it with me! (I covered this one in the introductory ; ) I would like to address each of these common misconceptions one at a time. 1. The first, that one system can successfully trade during any and all market timeframes is, for the most part, bunk because:

4 Markets can only do three things, they can go up, they can go down, and they can go sideways. But this too is a simplification of the problem we traders face. The changeover from an up market, to a down market, to a sideways market is clearly up for analysis, and is one of the most controversial and studied parts of trading that there is. That said, from a trading system s point of view, in a market such as the futures market, or the forex market, where taking a long position is just as easily done as taking a short position, then frankly, there are really only two things the market can do, it can either trend (up or down), or not trend at all. There are literally thousands and thousands of mathematical oscillating indicators that have been created to help us determine when these events occur. (Most you ll find are just a small variant of one or the other.) There are trader s who look at recurring market patterns, and believe that they can predict market direction through pattern recognition. There are trader s who use tools such as Elliott Wave, Fibonacci, and Gann angles to help them determine when a market is going to rise, or fall, or do neither. The fact is, that nobody knows what the market is going to do, and everyone is just doing their best to make their best guess, usually based upon historical evidence of what markets have done in the past. These best guess scenario are where we start to work through the problem of probabilities, and we learn to earn through risk vs. reward ratios; taking risks for potential rewards, and then, with a sound trading system, that has been tuned to a specific time frame, and action, can, with a bit of skill, and a lot of luck, find some success, enough success to actually squeaks out a bit higher return, than loss. Think about it, if you can create a trading system that can provide a consistent 5%, 8% or Maybe even a 10% return over time, most trader s would consider this trading system to be a great success. What this means, is that a system has to only win 5%, 8%, or possibly 10% more times than it loses. (Given that the risk vs. reward ratios are equal.) What this tell us, is that it is pretty darn difficult to create a trading system, that can, over any long period of time, give consistent percentage returns higher rather than lower. So, to simply address the first issue, most successful trading systems laser focus in on a very specific time of the a very specific market, and they spend all their time, effort and energy, perfecting that one time frame, such as the open of the market, or the close of the market, as it

5 has a higher tendency to repeat the same actionable trades in a similar manner in a higher winning percentage over a longer period of time. 2. One system can be successful trading any and all markets what so ever This is demonstrable, through the use of the Track n Trade Autopilot. Take any successful long term trading system, that works wonders on one particular market, during a single time frame, and apply that same system to any other market, and you ll generally find that the same parameters that work in one market fail miserably in another, even if you try to apply them to the same time frame. The most successful trading systems, will focus their efforts on creating a trading system for a single time frame, and single market, they become experts in knowing what this one particular market does, during a specific time of the trading day; day after day after day, and then they use their system to capitalize on those higher than average percentages to capture market profits. 3. A successful trading system must be extremely complex. Actually, in my experience, one of the most successful trading systems I ve discovered, is the scalping system, based on the straightforward theory that the process of simple wiggle room can provide a trader with a profitable trading system. This is done by using an indicator that has been best designed to give higher than average buy/sell signals during a specific trading period, either trending timeframes, or quiet time frames. By focusing our efforts in these areas, we can then use risk vs. reward ratios to capitalize on the wiggle of the market to hit a very tight profit target, while holding our stop loss order further outside the wiggle area of the over market as it moves through price and time. This method has proven to be a very simple OCO style market entry with a stop loss order set at twice the risk ratio of the profit taking limit order; a very simple and beautiful solution indeed.

6 How to avoid the major pitfalls of creating and executing a trading system. I ll often times compare trading the financial markets to playing chess, or checkers. When we are brand spankin new to trading, we think we are playing checkers, and that the strategies are the same, and simple for everyone, after all, markets can only do three things, right? They can go up, they can go down, or they can go sideways. But, the reality is, everyone is playing chess, while all along, the new trader believes everyone is playing checkers. Trading is way more complicated than it may seem. Phrases like, Buy Low! Sell High! get traded like baseball cards. Buy high, sell higher! It all sounds so easy. The fact is, that there are zillions of different ways the market can move, because it can move with any combination of up, down & sideways, with any number of combinations of the three that it wants! Just as an example, it can go: up, down, up, or it can go up, up, up, or it can go up, up down, or it can go down, up up, or it can go down, down, down, or it can go up, up, up, up, up, down, down, down, down, or it can go up, down, up, down, up, down, or it can go down, down, down, up, up, down, or it can go down, down, up, up, down, down, up, up, down. Oh, and we haven't even added in the ability to go sideways, what if the market went up, down, sideways, up, down, down, sideways, up, down? As you can see, there are literally zillions of ways the market can move, and being able to handle ALL of them with one trading system, is logistically and nearly impossible. So, when trading, we re not just playing checkers, we re at least playing chess, with a large number of different capable moves and almost an unlimited number of different outcomes with an almost unlimited number of strategies. The biggest trap most trader s fall into is the trap that one system can work across all markets, and across all trading time frames, and they waste hours and hours of their time attempting to find such a holy grail. If such a holy grail existed, wouldn t it be already in the hands of Merrill Lynch, Charles Schab, or TD Ameritrade? Wouldn t you think that these firms, with all their dollars would be the one s to find such a system, and just simply smoke the rest of the world? Well, past history tells us otherwise. Who had to go to the Federal Government, and get a bailout, if it wasn t these big, huge, masterminds?

7 That said, does is stand to reason that we, as small speculators could ever come up with a simple trading system that can help us make a nice, tidy, profit on our investment? Actually, in my opinion, it s probably vastly more likely that a small time speculator, such as you or I could devise a successful trading system for our own personal trading account, far more likely than these behemoths could do for their accounts. The one simple truth that we have in our favor, is that we re not trying to move billions of dollars into and out of a very active market in a very short amount of time. As a small investor, we have the ability to flip our position from bullish to bearish a dozen times a day if we so choose, we have the ability to run multiple small trading strategies on multiple markets, during multiple time frames all simultaneously. If we laser focus our attention, to one type of market, to one type of trading style, to one time frame, we, as small speculators, have, in my opinion, a much better chance at beating the market, than do the large behemoths, but it takes focus, attention to detail, study, and hard work. Nothing in this world come easy, we must earn our money, whether that be by working for someone else, or working for ourselves, and being a trader, we re working for ourselves, we re the boss, we re the president and CEO of our own trading account, and its up to us to get the knowledge, the training, the experience, and the education to do it right. If you re not up to the challenge, then maybe it s time to pass your savings off to some other CEO, who manages a large mutual fund, or 401k to manage your risk appetite as well.

8 The 7 imperative steps that must be followed, when creating your own trading system. When implementing a trading strategy within the Track n Trade Autopilot, there are seven very distinct steps that one must take to make sure every aspect of their trading system has been met. In this overview, we will quickly cover the steps you must follow to make sure you ve covered all your basis, when it comes to creating a successful trading system. Step 1: Pick your market. When picking a market to trade, we must determine what our cash outlay is going to be. If we are trading the futures market, then we have a number of considerations; can we afford the margin amounts for the time frames we re going to be trading? Does the market swing in such large moves, that we are unable to manage our positions, and are we able to afford to hold our stops back behind the market far enough that we don t get stopped out, but that also getting stopped out does not quickly cause us to receive a margin call. If you have a small account, you ll want to pick smaller markets, or even mini markets. Forex is always a great choice for small account holders, as the risk can be significantly reduced, by using mini or micro accounts, rather than the standard full size trading account. Step 2: Determine which time frame, or chart type you ll be trading Many traders prefer using intraday timeframes, such as 5 min, 10 min, or 15 minute charts, in an attempt to have smaller moves within a larger market, and to try and avoid getting hit with initial or maintenance margin requirements; day margin, is often times much less of a cash outlay, than is overnight style trading. On the other hand, charts that eliminate time within the equation altogether are becoming extremely popular. For example, range bar charts, move through price and time without subjecting themselves to a minimum time limit per bar. One bar may last one minute, while the next bar may last 10! This is done in an effort to remove flit lining market timeframes from the trading chart, and only allow movement with price to project a new price bar. Step 3: Determine the indicator you ll be using The indicator you use to help you determine your entry strategy can be the difference between great success and great failure.

9 There are literally thousands and thousands of indicators, but what we find, is that 99% of them are just minor variants to the major 10 or 20 foundational indicators that are already programmed into Track n Trade. Getting lost in the world of indicators, or as we like to term it Analysis Paralysis, is the worst place to find yourself languishing. Pick a solid, proven indicator, stick with it, learn it s strengths and weaknesses, learn what it was specifically designed to do, and then utilize it for that purpose, and for that purpose only. Many traders have found themselves wasting a tremendous amount of time, money and energy, trying to force a round indicator into a square trading strategy. Step 4: Determine the time frame in which you ll be trading. Will you be trading all day long, in a 24 hour market? (Not recommended) Will you be trading just the opening bell? How about just the closing bell? How about just the first three hours of the day? Or Maybe just the three hours during the middle of the day? How about just trading on Mondays? Or maybe just trading on Tuesday, Wednesday, and Thursday? Maybe we find a system that only works on Friday afternoons! Determining when the market generally exhibits the best market conditions for your particular indicator and trading system is a key element to your trading success. laser focus your trading time frames to match your indicators capabilities. Don t get caught up trying to make one indicator all things to all markets. It s a sure fire way to discover unending frustration, and losses. Step 5: Determine the best method of entering the market based on your chosen indicator, market, timeframe, and market itself. The Track n Trade Autopilot has several methods for market entry. The most common method is of course the Market Order, which executes a position within the market as soon as an arrow from our trigger is received. You can also use stop entry and limit orders for entering the market. Each order comes with it s own set of benefits, which are beyond the scope of this document, but suffice it to say, that each entry method is handled by the Track n Trade Autopilot with exact precision.

10 The stop order, is primarily used to wait for a confirmation of the market to move in the direction of the buy/sell signal, while the Limit entry orders does just the opposite, waiting for the market to perform a slight pull back before entering the market. Both entry types come with their own advantages, and disadvantages. Step 6: Using the proper filters Many indicators have their own filtering systems built directly into the indicator. The Bulls n Bears indicator is one such indicator. If you plan on using such an indicator, make sure you understand each filter, what it does, and what the creator s intent was for adding it. What market condition reflects the need for any given filter? The Track n Trade Autopilot contains several market filters; filters that have been designed for both entry as well as exit strategies. Entry filters are used to keep a trader from entering a market that is either moving too fast, or too slow. Both filters are available for your use. There are also exit filters; advanced filters that will exit your position if the market is again, moving too slow, or has moved into a profitable state in a rather quick fashion, and to a point where we might just want to grab a quick profit and exit. Step 7: Market Exit If I ve said it once, I ve said it a hundred thousand times before...getting into a market is easy, getting out with a profit is where the rubber meets the road, and cuts the men from the boys. Once we are in the market, we must protect ourselves against the market moving against our entry position, as well as possibly setting a profit taking target price, by utilizing Limit Orders. Most successful traders use a configuration of both types of orders for maximum protections as well as profit taking. The Track n Trade Autopilot has a very sophisticated set of exit methods, everything from mathematically calculated auto trailing stops, to jump stops, to stops based on counting and measuring areas of support and resistance. The Autopilot can even manage your stops in a way that will have them trail to a specific price level, break even, and then stop trailing, protecting your position from any downside backslide in price.

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