Don’t waste hours trying to build an automated strategy that might not work
I get asked all the time the same type of question when people are first starting off with automation in Trade-Ideas. “I want to automate my strategy, I want to buy when this price does this, or the chart looks like that”. It’s a very valid question and its also the best way to start automating your trading. Taking a strategy that you trade all the time and teach it to a robot. But what exactly is the easy way to build it? Well, it is more simple than you think!
Review your past trades
The key to getting started on the right foot is to have 3-5 trades that did exactly what you wanted it to do. This is where your trading journal becomes very useful. Go back to your past trades, and pick out 3-5 trades during the last 2 months that fit the criteria to your perfect setup. Picking out the best trades certainly helps as we want our robots to always play the best looking trade setups.
Once you’ve identified your 3-5 trades, its time to open up this tool: stockslikethis. Actually you’ll want to open up 3-5 tabs and start filling in the data it needs so we can pull all the data that those tickers were doing at that particular time.
What are we looking for?
In this sample screenshot, I’ve pulled up 3 tickers, JWN, ORCL, and ROKU. I’ve picked different dates so that we are not catching a market move. The first thing we need to identify is an alert that is found in all 3 tickers, but an alert that only has 1-2 or max 3 counts. You can see the New Low alert isn’t really a good alert since we can see ORCL had that alert 28 times and ROKU 36 times. Ultimately I ended up choosing the 5-minute opening range breakdown as my alert (not shown in the screenshot, but its there).
I found my alert, now what?
Great you found a common alert! This is usually the easiest part. Sometimes you might find 2 or 3 alerts, and that’s okay, we can test all them in a bit. But we will also need some filters to apply to build the first part or template of your strategy. Scroll down and start noting some similarities in the main filters. The main filters I look for are:
- Volume filters (1 minute, 5 minutes)
- Volume today (shares)
- Average 3-month volume
- Position in range, the position of open, position from the close
- Time of day
Combining the above-mentioned filters, plus any additional requirements from your trading plan, you can start to build the first template alert window within Trade-Ideas. If you found 2 or 3 different alerts, you can switch out the alerts and test to see if one or the other give better results.
Why this method works
Using this method will certainly save you a lot of time. If you just grabbed a random nice looking alert from Trade-Ideas you’ll most likely set pretty lose filters and then when you start running the backtesting tool Oddsmaker, you will get thousands of results in your backtesting. You’ll spend hours going over the filters trying to make the strategy a winning one. Even then after all the work you put in, you still might not have created a very profitable strategy.
However, by taking a strategy that you already trade, combine it with the data you already have in your trading journal, and using the power of the stockslikethis website, you can quickly narrow down the scope of what you’re trying to catch in this alert window.
I’d also like to mention, even if you are not trying to automate this particular strategy, you’ve already created a pretty solid alert window that you can use to help you quickly find you a ticker setting up your favourite type of trade. Just using this as an alert window is also a very viable strategy.
I’ve got more useful resources here if you are still having a hard time building awesome alert windows.