0xTheChartist

Don’t Fish, Hunt! The Winning Mindset for Building a Profitable Trading System

Choosing the right path is far more important than the effort you put in. Running blindly in the fog will lead you nowhere, no matter how fast you go. So stop wasting your time, money, and energy. This post is a step-by-step guide on how to build an effective trading system with indicators. It’s not about working harder, but about choosing the right tools and mindset.

 

1. What Makes an Indicator Effective?

An indicator is only effective if it makes you money. Any opinions about indicators that aren’t backed by numbers like win rate, profit factor, or other statistical data are simply subjective. In trading, feelings and guesswork have no place.

To determine if an indicator is effective, you need concrete data. Here’s what you should look for:

  • Timeframes: Which specific timeframes is the indicator profitable on?
  • Trading Pairs: Does it work better on certain currency pairs or assets?
  • Price Structure: Is it most effective during accumulation, distribution, or trending phases? Does it perform well with patterns like choch/boss/order block or Wyckoff phases (A, B, C, D, E)?
  • Trading Sessions: Does it perform better during certain sessions (London, New York, Asia)?
  • Trade Frequency: You need at least 500-1,000 closed trades for a solid sample size.
  • Backtesting Period: Minimum backtest periods should cover at least 3, 6, 12, or 48 months.
  • Performance Metrics: Win rate, risk-reward ratio, average stop-loss, average take profit, and the average number of bars per trade are all critical data points.

Without these, you’re just guessing.

 

Effective trading is based on facts, not feelings.

 

2. What Makes a Trading System Effective?

The saying “garbage in, garbage out” applies perfectly here. If you build a trading system on poor indicators, you will get poor results. So, a good trading system is built on indicators that are profitable in the same timeframe, trading pair, price structure, and session.

  • Statistical Trading: The more specific your statistics, the less room there is for emotional trading. Stick to the numbers and leave emotions behind.

Think of trading like hunting, not fishing. When you fish, you cast a line and hope for the best. When you hunt, you know exactly what you’re aiming at.

  • The Jungle You Hunt In: What currency pair or asset brings you the most profit?
  • The Season: During which session (London, New York, Asia) do you make the most profit?
  • The Target: Are you aiming for the market during an accumulation phase, a distribution phase, or during a breakout? Choose a market structure that aligns with your strategy, whether it’s trending, sideways, retests, or liquidity sweeps.

The key difference between hunting and fishing is that when you hunt, you know what size target you’re going after. You’re not guessing how big the fish might be. This lets you plan your time, emotions, and capital management carefully for each trade.

Finally, have a plan for when you’re in a losing or winning streak. How many consecutive wins or losses can you tolerate? What action will you take if you hit that limit? Define your risk before it happens.

Remember:

The more specific your statistics are, the less emotional your trades will be

Building an effective system starts with profitable indicators within a specific context (timeframe, asset), and ends with a detailed, data-driven trading plan.

 

3. Optimizing an Indicator or Trading System

Once you’ve identified a profitable indicator, it’s time to optimize it and turn it into a strategy:

  • Transforming Indicators: Use a predefined prompt (which you can find in another post on this blog) to convert any indicator into a strategy. This will allow you to generate the statistical data you need.

  • Backtest and Scan: Run the strategy through tools to quickly scan multiple timeframes and trading pairs. This will help you identify which ones are most profitable based on the statistics in your data table.

  • Refine Parameters: Adjust the settings to find the optimal results. Test different values for stop-loss, take profit, and other parameters.

  • Combine Indicators: Once you’ve fine-tuned individual indicators, try combining them to maximize profits. Test again, adjust settings, and repeat until you find the most profitable combination.

In Summary, building a profitable trading system isn’t about relying on gut feelings or working harder. It’s about working smarter by relying on data, testing, and optimizing until you find what works best for you.

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