The Basics of the Technical Trading System
A Technical Trading Systems consists of a set of instructions which have the role to advise the opening or closing of your current trading positions based on analysis performed on the financial data set and its results. A Technical Trading Systems also excludes randomness from trading and from the entire decision process. Strictly following the system allows you to eliminate the subjective elements, such as fear or greed. This why you must follow all rules of the system strictly even if you believe and consider that another path might be more advantageous and even if you consider that the current path is too dangerous or too pragmatic.
The first action you need to take when creating a Technical Trading Systems is to choose time periods, or the time-frames of your work. A lot of limitations regarding this aspect can be found in relation to the starting deposit and regarding the principles of managing the capital. Long periods are accompanied by low financial randomness than the short periods. Technical Trading Systems analysis of the system performed on long term times is more precise and provides a smaller number of wrong outputs. Long-term periods are also preferred due to their success. However, they do necessitate a larger initial investment. Short time periods are accompanied by more randomness also called noise. Also, the technical analysis is inaccurate and outputs provide more false results.
In the case of a small initial investment it is not too indicated to perform long term trades. It is much better to perform medium and short term periods first. On the longer time, the price fluctuations are less evident, but they may be large enough to destroy the initial investment. Thus, it is recommended that the first Technical Trading Systems to start on short time frames of work. You should also remember that the settings of your analytical data for every period should be selected on an individual scale. Also, when performing analysis on short time periods, the requirements of the analytical instruments must be as precise as possible.
The final task of a Technical Trading Systems is that it must define the point of entry. In any system, no matter what analytical instruments are used, the analysis must be performed on a large time period and gradually pass to the short ones. The primary things that must be defined in any situation are the market conditions viewed as a complete whole.
