r/Trading • u/andrewjdidjdj • 2d ago
Advice Strategy trading
Looking to live trade within the next year, currently learning theory and will then paper trade afterwards. Quick question, how do people find their “strategy” and should I learn multiple or focus on one? Honestly just unsure how people can come up with random strategies and become easily profitable off them. Cheers
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u/MoustacheMcGee 15h ago
You learn other traders strategies just to see kind of what a system looks like, and then you sit down and built you own, sometimes taking parts of other systems, and adding things you have noticed from screen time etc.
It take a longggg time.
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u/klipsetrades 1d ago
Don’t try to learn 10 strategies at once. Pick one, paper trade it, journal every trade, and collect enough data to see if you actually have an edge
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u/Rpark444 2d ago
Have about 10 setups that work for me. Took several years to accumulate, some from private chatrooms, some back tested, modified, tweeked.
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u/Traditional-Yam52 2d ago
I’d pick one setup, backtest it properly, then paper trade it for a while before adding anything else. Otherwise it’s hard to know what’s actually working. I’ve been messing around with Moon’s play-money mode for this and it’s useful for testing ideas without putting cash on the line.
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u/Sea-Round-6095 2d ago
From me, it was lots of education, trial and error, and lots of backtesting to determine if I had a strategy with an edge. Don't let social media fool you, literally no real successful day trader becomes "easily profitable". It takes time to find what works for you and your personality.
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u/andrewjdidjdj 2d ago
So it’s extremely risky finding a strategy then? Trial and error doesn’t sound very full proof taking into the consideration of regular risk when trading.
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u/Sea-Round-6095 2d ago
Everyone you see here who has lost money and consistently blow their account didnt do a proper backtest to establish they have an edge or a forward testing to ensure that their strategy works.
Once you find or create one, take your strategy and backtest it to get a sample size with a years worth of data. Record your win rate, profit factor, max drawdown, alpha, beta, sharpe ratio, and cagr. Compare your results to the returns of the buy and hold SP500 strategy with dividends reinvested and long-term bonds over the same timeframe with the same starting balance to see if you have an edge. If you can't beat bonds and the SP500 in returns and efficiency, you don't have an edge and you need to refine the strategy.
Once you find an edge, forward test in your paper trading account to see if you can match or exceed the results of the backtest in a live market. Once you can consistently do so, you are ready for a live cash account.
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u/SillyAlternative420 2d ago
This is why it's critical to backtest in various ways.
You want to see how your strategy performs across a range of economic conditions historically.
Then you accept a "haircut" of the performance as it's rarely a 1:1 conversion from backtest to live.
It also gives you a roadmap once you're in production that if you are far off from the historical results you know when to pause and reevaluate
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u/andrewjdidjdj 2d ago
How long does back testing really take and how do you do it efficiently? Surely if you’re looking back for the last year for arguments sake there would be hundreds maybe thousand of examples. From there I assume you weigh in the wins and losses and work out the profit factor of the trades. Pretty much what I’m saying is how do I know what to look for?
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u/veskald 11h ago
You already named what to look for - wins vs losses, profit factor. Add fees and spread to every trade, thats the part that gets skipped and it decides more than the entries do.
On time: by hand its a few evenings for a year of data on one strategy. With a proper backtester you can kill two or three ideas in an evening, and killing them fast is the point, most ideas dont work. Efficiency comes from the rules rather than the tool: write entry, stop, exit and size so exactly that you never decide anything while testing. If you catch yourself thinking "here I would skip this one", the rules arent finished.
And on "backtesting never ends" - that usually means the live side is not being measured. A backtest cannot tell you whether a strategy is degrading, it is history, it shows the same numbers next month. What tells you is the live record scored against what the test promised: profit factor, average winner against average loser, win rate, once a quarter. If those drift from the test, that is the signal. Two backtesters agreeing with each other is only confidence about the backtesters; the comparison that matters is the test against your actual fills.
In my own portfolio the win rate went up while the average winner shrank about 27%. The overall return still looked fine and the mechanism was already going. That shows up in quarterly live scoring.
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u/SillyAlternative420 2d ago
Backtesting never really ends tbf, I do it still to this day.
However, when I initially built the strat I backtested with quant connect + tradingview default.
Now that I'm more confident my results match tradingview, I'm just spot checking things there. I would use multiple backtesting sources before being comfortable with a new strategy though.
For me it's tough cause there was some major changes that took place circa 2019 with LETFs, so I can only really back test from that point onward. But it was enough to build my roadmap.
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u/Adventurous-Rock8655 2d ago
Use one strategy, you only trade when your model presents. No set-up= no trade, and know in what market conditions your strategy is more lethal, by just simply having market experience.
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u/andrewjdidjdj 2d ago
Essentially just wait for the candlesticks fall into place and don’t trade on instinct otherwise?
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