It’s not a rocket science to develop a trading strategy. You must have heard this line many times. My answer is Yes, it’s a rocket science to develop a perfect, full proof strategy.
To have market success, you must develop a trading system (strategy) that is right for you. In order to develop a trading strategy, you must your temperament, your time, your resources, your strengths, and your weaknesses. You need to ask this question yourself before going to develop a strategy.
- How much capital do you have?
- How much risk do you want to take?
- How much Loss you can bare?
- Trade is Intraday or Delivery?
- Strategy is based on price action, mathematical or use of indicator
Now we will see in detail how to develop a strategy with the help of above points.
- How much capital do you have?
- This is depend on your strategy how much profit you want to take from the strategy and how much you are going to invest in that. Also it’s a option buying and selling strategy.
First you want to fix your monthly target how much you want to earn from market and then start finding setup. For option buying you should have at least 50,000 rs investment. For option selling you should have atleast 1.5 Lakh as a margin.
- How much risk do you want to take?
- Here you need to decide how much risk you can bare every day. As per that your strategy parameter can be build.
- How much loss you can have?
- Here you need to decide how much loss you can take in a month. This is your risk capacity. Your strategy parameter need to build such a way that your risk should be cover in that.
- Trade is intraday or delivery ?
- Strategy parameter need to build such a way that you can decide your trade is Intraday or delivery. As per trading type then you can design the parameters.
- Strategy is based on price action, mathematical or use of Indicator?
- There are multiple ways to design the strategy with the use of price action od Indicators. Tradeshala use Mathematical setup hence we use maths system or formulas to design the strategy .
Very important is back testing. You should back test you option trading strategy for atlest last 2-3 years and then use it in actual trading.
These are some parameter you need to follow while developing a strategy.
