Lessons › Advanced track › Build your personal strategy

World 10 · Advanced track · lesson 14 · level 5

Build your personal strategy

A strategy is a recipe: which market, which setup, when to enter, where to exit, how much to risk and when not to trade.

In one line

Could a stranger follow your strategy and take exactly the same trades as you?

Explained simply

A strategy is like a recipe written so clearly that anyone could cook the same dish. It lists the ingredients (which market and chart), the steps (setup, entry and exit) and the portion size (how much to risk). If a step says 'add spice until it feels right', the recipe needs fixing.

The lesson

Start with a simple, testable idea, called a hypothesis, such as 'pullbacks to a rising 50-day average in strong trends tend to resume'. Then define the market, timeframe, setup, entry trigger, stop, exit, position size and no-trade rules so clearly that another person could follow them exactly. Test it by hand, check it on out-of-sample data with costs included, and forward-test it before trusting it. Keep it simple and suited to your schedule, because the best strategy is one you can follow consistently.

A worked example

Illustrative example strategy: large, liquid stocks on the daily chart. Setup: price above a rising 50-day average pulls back to it. Entry: the next day's open after a close above the prior day's high. Stop: below the pullback low. Exit: a 2R target, or a close below the 50-day average. Size: 1% risk. A test trade with entry 205 and stop 195 risks 205 - 195 = 10 per share. With a 30,000 dollar account, 1% is 30,000 x 1 / 100 = 300 dollars, so the size is 300 / 10 = 30 shares, and the 2R target is 205 + 2 x 10 = 225.

The same idea at four levels

1. Beginner. A strategy is a written recipe for your trades.
2. Foundation. It covers market, timeframe, setup, entry trigger, stop, exit, size and no-trade rules.
3. Intermediate. Write each rule so a stranger would take the same trades, using numbers instead of feelings.
4. Advanced. Run the pipeline: idea, written rules, manual backtest, out-of-sample check with costs, then a forward test, and drop the idea at any stage where it fails.
5. Expert. Fewer rules are easier to test and harder to overfit, so start with the simplest version that captures the idea, and match the timeframe to the hours you can really watch.

Mistakes to avoid

• Building a strategy around one great past trade.
• Writing rules that only you can interpret, so they drift over time.
• Leaving out no-trade rules, such as staying out just before results.

Goal of this lesson: Turn an idea into a complete, testable strategy with written rules.