Crafting a 100% Working Trading Strategy on Tradingview
Many traders strive to find the holy grail – a trading strategy with 100% accuracy that never loses. However, the reality is no system wins 100% of the time in the unpredictable financial markets. But through research, testing, and optimization traders can develop highly effective trading strategies with strong risk management on Tradingview.
This comprehensive guide explores the process of creating a profitable trading strategy with good win rates. We’ll cover:
- Realistic expectations for trading strategy performance
- Key elements of a well-rounded trading strategy
- How to backtest strategies on Tradingview
- Optimizing strategies for your trading style
- Managing risk to improve strategy resilience
- Psychology tips for executing strategies flawlessly
- Examples of robust trading strategies
Let’s dive in and break down the steps to develop a trading strategy that works for your goals.
Setting Realistic Expectations
First, traders must set realistic expectations about achieving 100% accuracy with a trading strategy. The market’s random noise will inevitably lead to losses on some trades. No indicator or strategy succeeds 100% of the time.
A more realistic goal is creating a strategy with a strong edge, high probability setups, and positive expectancy. Strategies with a 60% to 75% win rate can be very profitable if risk and reward ratios are properly balanced.
Accepting small losses is part of trading. The focus should be on maximizing gains on winners to exceed average losses. With realistic expectations set, let’s examine key elements of a complete trading strategy.
Key Elements of a Trading Strategy
Well-rounded trading strategies incorporate various elements that work together to identify high probability opportunities. Here are some key components:
Entry Rules – Clear rules defining exactly when to enter trades such as on indicator signals, price patterns, events etc.
Exit Rules – Rules for closing both winning and losing trades such as at support/resistance, trailing stops, time-based exits etc.
Position Sizing – Appropriate position size rules to limit risk such as fixed dollar risk per trade, percentage of capital etc.
Risk Management – Methods for managing risk on trades like stop losses, risk/reward ratios, portfolio heat mapping etc.
Timing – Trading within specific market sessions, days of the week, or times aligned with strategy.
Instrument(s) – The specific markets, stocks, futures etc. the strategy will trade.
Timeframes – The chart timeframes used such as 1 min, 5 min, daily, weekly etc.
Technical/Fundamental – The mix of technical indicators and/or fundamental analysis used.
Edge – The strategic edge based on market tendencies, behaviors, or inefficiencies.
Expectancy – Mathematical edge measured through backtesting expectancy and profit factors.
Strong strategies skillfully combine these elements to stack probabilities in the trader’s favor. Backtesting enables quantifying a strategy’s edge.
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Backtesting Strategies on Tradingview
Backtesting a trading strategy on Tradingview allows seeing how it would have performed historically. This enables fine-tuning a strategy and quantifying its edge and expectancy.
Follow these steps to backtest strategies on Tradingview:
- Choose a Market – Select the desired security to test such as a stock, forex pair, commodity etc.
- Import Historical Data – Import enough price data to cover multiple market cycles.
- Add Strategy Rules – Code the entry rules, exits, stops, position sizing etc.
- Run Backtest – Compile and run the backtest on the historical data.
- Analyze Results – Review performance metrics like profit factor, win rate, risk-reward ratio, drawdowns etc.
- Optimize Strategy – Refine rules and settings to improve performance and risk metrics.
- Forward Test – Run the optimized strategy on new out of sample data.
Repeating this process allows refining strategies to identify high probability setups. Let’s go over some tips for optimizing strategies.
Optimizing Strategies for Your Goals
When developing a trading strategy, focus on optimizing it to match your trading style and goals. Consider these optimization techniques:
- Correlate Exit Rules – Ensure exit rules align with entry logic to capture optimal gains.
- Filter Setups – Add filters on indicators, volatility, time etc. to isolate prime conditions.
- Balance Risk – Adjust stop losses, position sizing and risk parameters to survive drawdowns.
- Match Timeframes – Sync entry and exit timeframes for seamless execution.
- Minimize Overfitting – Keep rules simple and avoid excessive curve fitting.
- Assess Liquidity – Ensure adequate liquidity for order execution during backtests.
- Review Fees/Slippage – Account for commissions, spreads and slippage in performance metrics.
- Measure Consistency – Focus on steady compounding versus home run trades.
The goal is optimizing for long-term consistency tailored to your trading preferences. Now let’s examine risk management techniques.
Managing Risk to Improve Resilience
Risk management is critical for trading strategy resilience. Here are some effective techniques:
- Appropriate Position Sizing – Size positions to limit single trade risk to 1-2% of capital.
- Stop Losses – Use protective stops on every trade to contain losses.
- Profit Targets – Take partial profits at favorable risk/reward ratios.
- Limit Correlated Trades – Avoid overexposure to similar markets or trade setups.
- Hedge – Consider hedging highly correlated positions to diversify risk.
- Portfolio Heat Mapping – Visualize overall portfolio risk across different positions and scenarios.
- Drawdown Limits – Cease trading if maximum allowable drawdowns are reached until strategy is refined.
- Capital Preservation – Prioritize capital preservation over aiming for home runs.
Robust risk protocols enable trading through inevitable strategy drawdowns. Now let’s discuss the psychological element.
Psychology for Executing Strategies Flawlessly
- Have Patience – Wait for quality setups matching the strategy rules rather than forcing trades.
- Stay Disciplined – Stick to the trading plan and rules without exception or improvisation.
- Limit Emotions – Don’t let fear, greed or euphoria sway trading decisions.
- Risk Management – Size positions appropriately and use stops on every trade.
Executing strategies consistently with discipline is key to long-term success. Now let’s look at some examples of robust trading strategies.
Examples of Solid Trading Strategies
Here are some examples of well-rounded, high probability trading strategies:
Momentum Breakout – Trading breakouts during strong momentum surges in a trending market. Often utilizes volume and volatility analysis.
Reversal – Strategies looking to capitalize on trend reversals. Oversold/overbought oscillators like RSI can pinpoint reversal points.
Range Trading – Taking advantage of support and resistance in trading ranges. Horizontal support and resistance levels define key zones.
Pattern Breakouts – Strategies focused on trading breakouts from chart patterns like triangles, flags, wedges. Can use pattern recognition tools.
Mean Reversion – Mean reversion setups profit from spikes or extremes reverting back to the average price. Bollinger Bands help identify extremes.
These examples combine analysis methods, indicators, and risk management protocols into complete high probability strategies. Traders can use them as templates and optimize for their own style.
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Final Tips for Strategy Development
Here are some final tips as you work on crafting the perfect trading strategy:
- Remain flexible and keep improving the strategy over time as you gain experience.
- Focus on smooth equity curves rather than home runs. Consistency over the long-term is key.
- Specialize in a niche trading style that fits your personality and strengths.
- Code rules mechanically for systematic execution. Discretionary trading is prone to emotional errors.
- Accept that no strategy wins 100% of the time. Losses are part of the game.
- Balance quantifiable edge with robust risk management for long-term viability.
With the right approach, traders can develop strategies with strong win rates over 60-70% and consistent profitability. Stick to the rules, manage risk, and success will come over time.