Trading Systems: The 5 Essential Steps to Create Your Automated Strategies

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If you're interested in systematic trading but don't have a clear idea of how to create your own trading systems, don't miss this video!

We discuss the five basic steps to creating complete trading systems, all explained in a simple and intuitive way.

In addition, we'll show you a practical example to better understand each step and give you useful tips for your first steps in the world of systematic trading.

Enjoy the video! 😉



Hello everyone, one of the coaches at Unger Academy here and I welcome you to this brand new video.

So, how do you build a trading system?

For those of you who are new to this field and maybe have asked themselves this question, today we’re going to try to answer it in a straightforward and clear way by going through the steps required to building a trading system.

Before we start, though, if you'd like to receive a PDF guide where we talk about these 5 steps more in-depth, I invite to comment below this video with "5 steps".

The 5 steps to creating a Trading System

Okay, so let's get started with a list of the 5 steps to building a trading system.

The first step, I marked it as number zero in brackets, is: what instrument?

Because before I even start building a trading system I need to know what I am writing it for.

What is the product? Is it a stock? A derivative product? Is it Bitcoin?

So, once I’ve defined the asset, the instrument, the five steps that I need to follow to build a trading system are:

Number 1: Defining when to buy that instrument.

Number 2: What is the purchasing price?

Number 3: How much capital is needed to buy the instrument?

Numbers 4 and 5: When to sell it and at what price?

Of course, if we are dealing with derivatives, we could also reverse buy with sell, but for simplicity's sake, let’s just assume that we open a position by buying and close a position by selling.

When to buy/sell and at what price?

I want to tell you right at the beginning that Numbers 1 and 2, and Numbers 4 and 5, are pretty much the same at first glance.

If I were to answer the question of when I should buy a product, I might answer “when it reaches that price”.

However, this is by no means always the case.

Let’s take the case where, for example, I’m watching the price of a stock currently trading at $150, and I estimate that it might be worth my while to buy it if the price drops to 130.

However, if we are in a situation where the market starts to fall, but catastrophically, and I am talking, for example, about the crash that occurred in the stock market in March 2020. In such a case, we might decide to wait to buy, even though the price has exceeded 130.

So, you can see there is always a “when” to buy it, whether the price is reached or not.

And that “when” could be translated as volatility in the case of this example.

I’m willing to buy at that price when volatility is in a range that is more or less acceptable.

If there is a severe market crash due to panic selling, I certainly won't try to, as the jargon goes, “catch a falling knife”.

The same considerations apply, of course, to decide when to sell and at what price.

Example: Trading system on Amazon Stocks

So, once we have defined these five steps, we need to see them in a concrete example.

So, let's go back to MultiCharts, to the equity curve you saw at the beginning of this video, and let's try to understand how this system is built.

I’m going to give you a quick look at the code first, but we don’t care because we had our own Composer software help us write this.

But where are these five steps within the Composer?

Of course, there’s no need to elaborate on point zero because we have already decided to work on Amazon stocks.

We enter the start and end times, the normal times for the US market.

We have to decide on the purchase price and the time.

In this example, let's say, we want to buy Amazon when there is a retracement. Here is the condition “when we have a price cross against the Bollinger bands”.

If you want to learn more about what Bollinger bands are, we made a dedicated video, we'll leave you a link in the description.

We then need to define the price.

In this case, it’s "at best". This phrase means that when this condition occurs, namely the cross between Bollinger bands and price, we’ll buy at whatever price the market offers us.

In fact, this is called a “market” entry, because you enter at the current price.

Number 3: “How much capital?” could be defined here.

Here we see the number of contracts, but we could also distinguish it as the number of shares.

Or we could adjust this by also defining the capital per single trade.

After that, we have to focus on the exits.

In this case, I have included two types.

The first one, when to sell it, Number 4. I decide to sell it anyway after three sessions.

So after three trading sessions on the stock exchange, we’ll close our position.

At what price? Number 5, “at market” in this case as well.

I then entered two more conditions, one in Stop loss and one in Take profit, when we reached a loss of $1,000 or a gain of $5,000, respectively.

Final Thoughts

These five steps are always present, in one way or another, in all trading systems.

It isn’t possible to build a trading system without these five steps.

The question we might ask now is: But how do I choose which product to buy?

Who can tell me when to buy a product and at what price?

Or, how do I know what the right capital is for this trading system, and what are the proper exits?

Well, at Unger Academy, that’s exactly what we do.

These are more than valid questions. The answer comes from a lot of practice and of course, study of the markets.

If you're interested and want to learn more about these 5 steps, I invite you to please comment below this video with the words "5 steps". We'll send you a short PDF guide where we explain more in-depth the topics that we've discussed in this video.

On the other hand, if you don’t have the necessary experience to master this subject and think you need help to start investing in the markets with a systematic approach as we do, then I recommend you go and click on the link in the description of this video.

From there, you can watch a free presentation by Andrea Unger, explaining the “core” or foundation for creating trading systems.

You can also get our best-selling book called “The Unger Method” covering only the shipping costs, that's it.

And finally, if you want, you can also book a free call with a member of our team for some free strategic consultation.

If you like this video, please leave us a like and, if you haven’t already done so, don't forget to subscribe to our channel as well, and click on the notification bell so that you can stay up to date and be notified when we post a new video with new content.

With that, thank you so much for watching and we will see you soon in our next video! Bye-bye for now!

Need More Help? Book Your FREE Strategy Session With Our Team Today!

We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.

Andrea Unger

Andrea Unger

Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.

I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems. 

In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.

Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.

Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.