Elements of a Trading System
1. Screening Criteria
Example: Market Cap > $1B, PE < 20
2. Buy Signal
Example: Price breaks above 20-day moving average
3. Sell Signal
Example: Price drops below 10%
4. Position Sizing
Example: Max 10% per stock
Steps to Build a System
- Choose a strategy
- Set rules
- Backtest
- Execute
Summary
Keys to building a system:
- Clear strategy
- Clear rules
- Backtest verification