Regardless of how you get your signals, a trading strategy is made up of
a few things. I am going to separate money management from this part of a strategy and deal with it on its own in a later chapter. But keep in
mind that the best trading strategies and a great system will not help you
one bit without a proper money management strategy. So ignoring money
management for now, the first thing that you will need is an entry signal,
which is then followed by an exit signal. The exit is composed of two parts.
One tells you when to get out with a profit and the other tells you when to
get out with a loss. The exit signals are partially derived from your money
management strategy, but we’ll discuss that later. Other things that you
may have in your system are the time frames you will trade and the holding
period of your trades. You may have different systems for different markets
or types of markets. You may have different systems to trade long-term
and short-term. This may call for you to look at different time frames and
holding periods when making your trading decisions. Regardless of these
things you still need the basics: a buy, a sell, and a protective signal to have
a proper strategy.
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