Technical Analysis › Technical Strategy Applications

Technical Strategy Applications

A strategy is a written rule set covering entry, exit, sizing, and the market conditions in which it applies. The last of those is what separates a strategy from a collection of indicators: a rule set that does not state the regime it assumes will be run in conditions it was never suited to, and the losses will look like bad luck rather than misapplication.

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Direct Answer

A technical strategy is a written rule set covering entry, exit, sizing, and the market conditions in which it applies. That last element is what separates a strategy from a collection of indicators: a rule set that does not state the regime it assumes will eventually be run in conditions it was never suited to, and the losses will look like bad luck rather than misapplication. Judging whether it works means deciding in advance what a working result looks like, over how many trades and with what drawdown, because a profitable run over ten trades is inside the range of noise for almost any rule set.

How do you know a strategy is working?

By deciding in advance what a working result looks like, over how many trades, in which conditions, and with what drawdown, and comparing against that. A profitable run over ten trades is inside the range of noise for almost any rule set, including a bad one.

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