Building a good foundation is the start of a good futures trading systems. If you build a solid foundation then good returns are more probable. But, knowing what are the building bricks is not that easy. When you start the process to build a day trading system then start with these bricks.
Robustness is a starting principle. If your system is robust then it is portable and can be adaptable. Adaptability is the ability to work on different markets or different time frames. Systems that are not robust are often curve fitted systems that only work on your testing data. Robust systems will work on anything outside of your testing data.
Another principle is low cost. Higher turnover systems can lead to higher fixed costs per trade and prolonged drawdowns. Know your fixed costs before you begin system testing. Do not forget to include the opportunity cost of capital in your analysis.
Expectancy is the heart of your returns.
What is your expecting winnings per trade. Find your winning percentage and average win and average loss. This is your expected profit. If you can lower your average losing trade your results will dramatically rise.Position sizing is the amount allocated to each trade. If you trade too big then your results will be more volatile. Your drawdowns will be larger. Your risk of ruin will be much greater the larger your position size. Limit your position size to no more than one percent of your equity on any one trade.
If you build a futures trading system based on the founding principles then the chances of success will skyrocket.
Six Components Of A Futures Trading Systems