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The Components of a Trading System

POSTED ON 22-07-2019
3 months ago
3 minutes, 29 seconds READ

The following article is a sample of the type of educational insights and market analysis from The Frontier Research Group Corp, a concentrated team of cryptocurrency traders, analysts and enthusiasts. We work tirelessly to provide quality material to our community members. 

A Complete System

What is a Trading System

Elements of a Successful Trading System

The elements of a successful trading system cover each major decision point for profitable and successful trading. Entries – When to buy or sell

Entries – When to buy or sell

Stops – When to exit a losing position

Exits – When to successfully close out a winning position

Trade Tactics – How to optimize your buying and selling

Market Selection– What are you buying and selling, keeping a consistent watch list full of ideas.

Position Sizing – How much to buy or sell. Remember position sizing is key, a lot of cryptocurrency traders get stuck in the how much leverage should I use. *Position sizing determines the risk.*

Markets – How many are you trading?

The first thing you should do is come up with a successful watchlist. A trading watchlist is what generates your ideas. If you are not trading enough markets your opportunity is lowered and reduces your chances to find a trending market. You want to trade markets with good liquidity.

Position Sizing – How much to buy or sell

A lot of traders tend to approach this aspect of the system incorrectly. Your job in trading is to make small mistakes and lose small, while waiting for the good trades and good setups to give you winning trades that outperform losing trades. This is the essence of money management and controlling risk.

How much you should be buying or selling is one of the most important concepts in trading. Beginning traders have a tendency to risk far too much on a single trade increasing their odds of going bust. They can have a good trading style yet go overboard on position size.

Entries – When to buy or sell

When to enter a trade is called your trigger point, entry decision, signal, and many other terms. Automated systems can generate “signals” that can define the exact price and market variables to enter the market by buying or selling. These are also created by rules you set for your trading system.

Stops – When to exit a losing position.

You have to know when to exit. If you do not come with a way to handle losses you will not succeed in the long term. Predefine where you will exit a trade before you take a trade or enter a position.

Exits – When to get out of a winning position

A lot of the faux trading systems out there rarely address how to exit or where to take profit. Yet this component is such a crucial skill and is critical for the success of the trading system. If you come across a trading system that does not address how to handle winning positions you are following an incomplete system.

Tactics – How to buy or sell

Once your trigger has been signaled, you should have other variables or tactical plans on how to optimize the execution of your strategy and system. This is very important for larger accounts where there is a lot more external factors to consider and can make the largest market impact.


Following a formula/system is the best way to make consistent money in the world of trading. When you know your system works it is easier to consistently act on the signals the system creates. This allows you to stay focused during winners, and not let losers cause you to be fearful when you should be courageous. Following your system will help you control emotions that come when you are trading and scaling with size. A complete trading system that consists of the these components is what you should have in your own system. Important decisions and discretionary decision making come once you are making money. You should have a system that is your bread and butter regardless of how experienced or skilled you think you may be.

Authored by WildWestTrades.