These are some aspects to pay attention while choosing trading strategies
- Check the trading period, the historical averages should be as similar as possible. The trends should have a clear direction towards the strategy (buy/sell), possibly without sharp reversals inside.
- Check any earnings into the trading period and the asset historical behavior during the period of their declaration.
- Check the sector impact on trend
- Compare actual price and asset historical trend to avoid buying at the highest price or selling at the lowest.
- Check seasonality.
- When current trend doesn’t follow seasonality index and historical averages, to analyze the trade you must be careful.
- Pay attention by checking the behavior of prices in the period preceding the entry date and its trend compared with historical patterns.
- Check traded volumes.
- Check risk/benefit ratio
- Always check the volatility of the stock to make sure it is acceptable for you.
- Don’t choose a too short trade period
- Good ratio between wins and years of backtest
We always recommend you follow the evolution of the trend, its corrections or inversions that could give different indications than those we expect. Where’s possible use risk management strategies like Stop Loss.
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