Creating a basic trading system is not difficult. Contrary to popular belief,
you do not have to be a computer engineer or have advanced computer programming knowledge to design an effective trading system.
The main objective for a trading system should be to use basic logic, determined by you, to automatically get you into various trades and subsequently get you out of those trades depending on certain circumstances.
There are many so-called trading systems that are available for purchase that generate trading signals that get you in and out of the markets. However, the problem with these systems is that you have to ascribe to the builder’s beliefs about the markets. This means that you are not in control of the research or back testing of the system itself. The particular systems might work for those who designed them but that is only because the builder had done the research to gain the confidence needed to trade the system. The moment you start losing money with newly purchased trading software, you are going to lose confidence and find another system to repeat the cycle all over again. Then there is always the question of why the builder would sell such a fantastic money-making system in the first place? The best thing for you is to do your own research and back testing and build a trading system from the ground up.
Microsoft Excel is a great starter tool for the system builder. You can use visual basic that comes with Excel to program your own parameters into the trading system. It is easy to use formulas if you are just looking at one investment, but, what if you want to go through 5,000 investments at the end of trading each day? You can write a simple script that queries the web for historical price information for single or multiple stocks and then overlays your parameters for each investment before continuing to the next stock. It could take you less than twenty minutes to go through all 5,000 stocks this way. Once you have a portfolio of stocks, you could run a similar script each day to determine whether or not you need to exit certain positions. Excel is also helpful in back testing a particular trading system. It can be used to create a robust back testing suite that queries daily, weekly, monthly, and yearly data from multiple sources and runs your system on top of the retrieved data. Developing a trading system in Excel gives the builder a lot of flexibility since everything can be changed rather quickly.
Buying a ready-made software package is very tempting. You just spend the money and get a well packaged system from a particular vendor and you are ready to trade. You do not have to do any of the time consuming research or back testing that the builder had to go through. However, the minute that the software performs in a way that cannot be explained, you have no real way of digging into the system to find the causes. Instead, you will abandon the trading system for something else. Even if you were to reverse engineer an already built trading system, you would be wasting valuable time that could have been spent developing your own design. By using a product such as MS Excel, you will be able to set up tools that are simple yet effective in evaluating your particular approach. You will have ultimate control of your trading approach, should you find yourself with the need to delve into performance discrepancies, erroneous data, or something else.