Why You Need A ‘Trading System’

In many successful trading systems, especially trend following systems, it is not uncommon that only half of all trades or even less end in a profit.

But these winners are on average by a huge factor bigger than the losers and therefore let your account grow. As an example you find here an equity curve of a system which chooses strongly uptrending stocks within the S&P 500 by Bollinger breakouts (figure 1a and 1b). This system gains in average 13.4% per year between 1991 and 2020. (The backtest was performed with AmiBroker and includes 0.25% Slippage and Commissions. The system has a maximum of ten stock positions open at the same time; the detailed rules you find in the newly updated book ‘Trading Systems’).