Number 1 – Concept & Objective
Number 2 – Crib Sheet
The document containing the rules that make the strategy quantified, reproducible and scaleable.
The crib sheet must have a quantified set of parameters.
Number 3 – Backtesting
Manually and programmatically
Number 4 – Optimisation
Breaking down the strategy to understand the effect of the various components
Number 5 – Forward Testing
(Optional). Test on a demo account:
- Can you execute the strategy consistently?
- Does it give enough set ups?
- Does it fit your personality when trading in real time?
The results feed back into the Crib Sheet
Number 6 – Forward Testing on a Live Account
Run for about three months
- Does the market slip your orders sometimes?
- Does the market give you the fills you want?
- Are you able to get involved in all the trades?
- Is the frequency too high?
Number 7 – Trade on a real account