How to Create a Trading System

Creating a trading system can seem like a daunting task if you don't know what you are truly trying to achieve. The goal of creating a system is to find a set or rules and parameters that can give you an edge in the market and hopefully return a profit. Many traders have the goal of creating a system but focus on all the wrong areas. The main focus for the majority of traders is how to generate a profit. Now this is obviously a large part of a system but if your sole focus is how to return a profit and not the rest of your system then you are most likely going to overlook the other 75% of your system.

Lets break down how to create a system from scratch, for this example we are going to focus on price action since Gorilla Futures is based on price action.

The idea:

First off you need to have an idea on how you would like to trade, as stated above we are going to focus on price action. The idea behind this is traders need to first grasp the concept and it needs to resonate with them. Creating a system based off something you don't fully understand is going to generate nothing but problems. Many new traders run into this issue because they are chasing profits and not focusing on building a reliable system that works for them and resonate with them.

For many new and even experienced traders there is going to be a period of trail an error. You might have to try a handful of different trading ideas before settling on one. There is nothing wrong with this and this period should not be rushed. Spend a few weeks to a few months on each idea. Once you have a type of trading you would like to build on and create a system around then and ONLY then should you move on.

The system:

The system it self is broken down into three parts:

#1: Trading idea (Price Action)

#2: Parameters

#3: Rules

We know our first part is based on price action in this case, now we need to find our parameters. When we talk about parameters we are mainly talking about how we get into a trade,what we are going to do once in a trade and lastly how to exit.

Those three parts that make up our parameters might seem obvious but will need to be set in stone. For this example we are going to be looking strictly at price action and this system is strictly for example/demonstration purposes only.

You will need to be able to setup parameters for both long and short entries, we are only going to focus on longs in this blog.

How to get into a trade?

First off price needs to be making Higher Highs & Higher Low's, not only will price need to be making HH's & HL's we need to throw is some sort of filter. In this case our filter is going to be a 14 EMA, only if our EMA is pointing in a positive direction combined with the correct price action/market structure will we look for longs.

Once we have a few parameters we then need to find a signal for entry. For this example we are going to use an engulfing candle to get into our trades, ONLY if all of our other parameters have been checked off.

Now that we know how to enter into traders we then need to figure out how to manage this trade. This goes back to trial and error, and you will need to back test this over a long period of time.

The best way to get out of a trade is to have an ATM setup, this will take you out of the trade at your set levels. Again you will need to go and back-test what these set levels will be and set your ATM accordingly. If you are a Gorilla Futures member you should know exactly how to do this.

There is no set in stone way to manage/exit your trades, you will simply need to figure out what works best for YOU, each trader is different.


Once again each trader will have a unique set of rules that he/she will need to follow. The best way to find these rules is to back test and use trail and error to find out what works best for you.

A few of the rules we follow here at Gorilla Futures are as follows:

#1: What time are we placing trades between.

#2: How many contracts.

#3: When not to trade.

#4: Pre-market routine.

#5: When to stop trading.

#6: Routine outside of trading ( sleep schedule, breakfast, working out etc etc)

#7: How to place trades, will you use the DOM or a simple order entry method?

#8: Journaling, how will you keep track of whats working and what needs improvement.

#9: What will you be doing in between trades?

#10: What time frame will you be placing trades on?

These are just a few of the rules a trader will need to have figured out before he/she starts trading.

This may seem like a daunting task due to the sheer amount of research a trader needs to go through. If you compare this to starting a business the rules are all the same, you wouldn't open a new restaurant with out knowing what food to serve and how/when to make it and who your customers are would you? If the answer is yes then you might want to take a step back before risking your money on trading.

Go through this list and focus on one item at a time, once you have one item figure out then you can move on to the next one and keep this up until you are all the way through.

You got this!