The Trading Systems Update window sets Thinking Stuff apart from all other trading software. This is where you create your trading systems using clicks of the mouse.
But while this should make it 100% easier to set up your trading systems (as opposed to other software which makes you write your systems in a programming language), there is still a learning curve.
You still need to think.
Hopefully this page should remove most of the mystery. It's really very simple. If you haven't already, reading the
Systems Trading Theory will make the below even easier to understand.
These pages will also help:
Different Stages Of A Trade
A trade can be broken into various different stages: you place the order; that order is taken up, and you're in a trade; perhaps you move your stop loss; perhaps you move it again; and finally your stop loss or take-profit is hit, and the trade is completed.
You have rules for each different part of the trade (right?). You have rules which say you are allowed to enter the trade. You have rules for when to move your stop loss. You have rules for when to exit now! now! now!
In Thinking Stuff, your trading system is broken into these parts:
| Entry Rules | Specify when you are allowed to trade. All rules (if there are more than one) must evaluate to True for an order to be placed. Mandatory. |
| Entry Values | If the Entry Rules allow an order to be placed, the Entry Values specify the entry price for the order. Mandatory. |
| Init. S/L Values | If the Entry Rules allow an order to be placed, the Initial Stop Loss Values specify the initial stop loss price for the order. Mandatory. Because this is automated software, and because you probably won't be in the same room as the computer when your Internet connection drops out, stop losses must always be used. If they were not used, your entire trading account might be at risk. |
| Init. T/P Values | If the Entry Rules allow an order to be placed, the Initial Take Profit Values specify the initial take profit for the order. Optional. |
| Move To Break-Even (Rules) | Once in a trade, these Rules determine when the stop loss will be moved to a position of break-even. Optional. |
| S/L Mgmt Rules | Once in a trade, the Stop Loss Management Rules determine whether or not the stop loss will be moved. All rules must evaluate to True for the stop loss to be moved. Optional, but necessary if you don't have a take profit set. |
| S/L Mgmt Values | If the S/L Mgmt Rules allow the stop loss to be moved, the Stop Loss Management Values specify where the stop loss will be moved to. Optional, but having S/L Mgmt Rules without any S/L Mgmt Values means your stop loss will not be moved. Exit At Market can be used here. |
| S/L Mgmt Rules #2 | Gives you a second set of criteria for moving the stop loss. Optional. |
| S/L Mgmt Values #2 | If the S/L Mgmt Rules #2 allow the stop loss to be moved, the Stop Loss Management Values #2 specify where the stop loss will be moved to. Optional, but having S/L Mgmt Rules #2 without any S/L Mgmt Values #2 means your stop loss will not be moved. Exit At Market can be used here. |
| T/P Mgmt Rules | Once in a trade, the Take Profit Management Rules determine whether or not the take profit will be moved. All rules must evaluate to True for the take profit to be moved. Optional. |
| T/P Mgmt Values | If the T/P Mgmt Rules allow the take profit to be moved, the Take Profit Management Values specify where the take profit will be moved to. Optional, but having T/P Mgmt Rules without any T/P Mgmt Values means your take profit will not be moved. Exit At Market can be used here. |
| T/P Mgmt Rules #2 | Gives you a second set of criteria for moving the take profit. Optional. |
| T/P Mgmt Values #2 | If the T/P Mgmt Rules #2 allow the take profit to be moved, the Take Profit Management Values #2 specify where the take profit will be moved to. Optional, but having T/P Mgmt Rules #2 without any T/P Mgmt Values #2 means your take profit will not be moved. Exit At Market can be used here. |
And each of the above can be used for both the Long and Short directions.
Please note, that only one order -or- one trade can ever be open at the same time. If a Long trade is already open, the Long Entry Rules are no longer checked. Another Long order will not be placed while you have a Long trade open. Instead the Trade Management Rules and Values kick in.
If there is an existing Long order, it will be modified if necessary. Again, another Long order will not be placed.
However, Long and Short are separate to each other. If you have a Long trade open, a Short order may be placed. And vice-versa.
Rules & Values
You might notice that there are two broad categories - Rules and Values. When all the Rules evaluate to True, stuff is set at the Values.
For example, when all the Entry Rules evaluate to True, an order is placed where the Entry Values say. The initial stop loss is placed where the Init. S/L Values say.
When all the S/L Mgmt Rules evaluate to True, the stop loss is moved to where the S/L Mgmt Values say. Etcetera.
The Move To Break Even Rules don't need any associated Values, because the price that the stop loss will be moved to will always be to a position of break-even.
Creating Trading Systems
Basically, you go through, building your trading system, by the addition of one rule (or value) at a time.
Here's an example:
| Rule Type | Description |
| Long Entry Rule | MACD in overbought |
| Long Entry Value | Close plus 10 pips |
| Long Initial S/L Value | Entry minus 20 pips |
| Long S/L Mgmt Rule | MACD in oversold |
| Long S/L Mgmt Value | Exit At Market |
| Short Entry Rule | MACD in oversold |
| Short Entry Value | Close minus 10 pips |
| Short Initial S/L Value | Entry plus 20 pips |
| Short S/L Mgmt Rule | MACD in overbought |
| Short S/L Mgmt Value | Exit At Market |
Exiting At Market
Any of the following can be used to "Exit At Market". As long as the corresponding "Rules" evaluate to True, the trade will be closed:
Long (or Short) S/L Mgmt Values
Long (or Short) S/L Mgmt Values #2
Long (or Short) T/P Mgmt Values
Long (or Short) T/P Mgmt Values #2
As many rules as you like
That example above had only one rule for each part of the trading system. But you can have as many as you like:
| Rule Type | Description |
| Long Entry Rule | MACD in overbought |
| Long Entry Rule | Bollinger Bands Flaring |
| Long Entry Rule | ADX In Overheating |
| Long Entry Rule | Currently In Simple Moving Average Swing Down |
| Long Entry Value | Close plus 10 pips |
| Long Initial S/L Value | Entry minus 20 pips |
| Long S/L Mgmt Rule | MACD in oversold |
| Long S/L Mgmt Rule | Bolling Bands Narrowing |
| Long S/L Mgmt Rule | Slow Stochastics Is Rising |
| Long S/L Mgmt Value | Exit At Market |
You might notice that this example had no Short rules, and this is perfectly fine. In fact, in the backtesting I've done, it's a complete fallacy to mirror your systems - the Long and Short trades do not behave the same. However, each system is different, and you should work out for yourself what's best for you.
Ok, so if there are many rules, each and every one must evaluate to True for that thing to happen. In the most recent example, the Long order will only be placed if:
- MACD is in overbought; AND
- Bollinger Bands are flaring; AND
- ADX is in overheating; AND
- The price is currently in a Simple Moving Average swing down.
Once all of these are True, an order will be placed. Should the price not move far enough for the order to be taken up, and the next bar means *any* of those 4 rules evaluate to False, then the order will be cancelled.
Should the price not move far enough for the order to be taken up, and the next bar means those 4 rules still evaluate to True, then the Entry Values, Init. S/L Values, and Init. T/P Values will be re-evaluated. If necessary, the order will be modified with the new settings.
What happens if you have more than one Value?
E.g.:
Long Entry Value - Close plus 10 pips
Long Entry Value - Lower Bollinger Line
Firstly, Enter At Market and Exit At Market override any other setting.
If there is no Enter At Market or Exit At Market, it depends on if it's for a Long or Short trade. If you have multiple Long Entry Values, all are calculated and the highest is used. Also with the Long Take Profit Values the highest is used. With Long Stop Loss Values the lowest is used.
If you have multiple Short Entry Values, all are calculated and the lowest is used. Also with the Short Take Profit Values the lowest is used. With Short Stop Loss Values the highest is used.
It's not often that you would have more than one though, except in the case of...
Pip Offset
The Pip Offset setting is added to the result of the other Values.
For example, let's say in your "Initial S/L Values", you use "X Pips Below Entry", and you specify 50 pips. So the initial stop loss is going to be 50 pips below the entry price. Well, if you also had another "Initial S/L Value" of "Pip Offset", and specify 5 pips, then the result is going to be a stop loss 55 pips away from the entry price.
In the case of a long stop loss, it would move the stop loss a further 5 pips down. In the case of a long entry or take profit, it would move those a further 5 pips up. (And reverse for shorts). But you need something to add the 5 pips to.
Pip Offset would normally go with Values such as "[OHLC] Of Current Bar", or "Simple Moving Average", so you're not taking positions exactly at those Values, but a bit above (or below, depending on the direction of the trade).
You can't use Pip Offset by itself. The resulting value would have no meaning.
This Pip Offset setting also allows you to create a...
Trailing Stop Loss
To set up a pip-based trailing stop, you could do something like the following (forgetting for a second about all the entry rules and such):
S/L Mgmt Rules - Current [OHLC] Above Previous (using the Close)
S/L Mgmt Values - [OHLC] Of Current Bar (using the Low)
S/L Mgmt Values - Pip Offset (50)
What the above example means, is that whenever the Close of one bar is higher than the Close of the bar before it, the stop loss will be moved to be 50 pips below the Low of the current bar.
In addition, there are these Values which could also be used for trailing stop loss purposes:
- [OHLC] Plus X Percent
- [OHLC] Minus X Percent
- [OHLC] Plus X Pips
- [OHLC] Minus X Pips
What's the #2 thing?
It gives you 2 different conditions for when to move your stop loss or take profit.
For example, let's say your Initial S/L Value was set to "The Lower Bollinger Line". You might want to use the S/L Mgmt Rules to keep your stop loss at the same value as the lower Bollinger line, as that lower Bollinger line moves around.
So you set as following:
| Rule Type | Description |
| Long Entry Rule | Close Above Lower Bollinger Line |
| Long Init. S/L Value | Lower Bollinger Line |
| Long S/L Mgmt Rule | Every Bar |
| Long S/L Mgmt Value | Lower Bollinger Line |
You would probably add a whole bunch of other Entry Rules, but when I use a value like the Lower Bollinger Line, or a Simple Moving Average, etc, as the stop loss, I tend to put the equivalent rule in as a Long Entry Rule to make sure the price is actually above that line before trying to set a stop loss there.
That's all fine, but as well as keeping the stop loss at the Lower Bollinger line, sometimes you expect a reversal to be imminent, and therefore want to jump the stop loss up to lock in as much profit as possible. Let's say that if the price goes in the wrong direction for 2 bars in a row, you want to move the stop loss to the upper Bollinger line.
Well, you'd do something like this:
| Rule Type | Description |
| Long Entry Rule | Close Above Lower Bollinger Line |
| Long Init. S/L Value | Lower Bollinger Line |
| Long S/L Mgmt Rule | Every Bar |
| Long S/L Mgmt Value | Lower Bollinger Line |
| Long S/L Mgmt Rule #2 | Wrong Direction (for 2 bars) |
| Long S/L Mgmt Rule #2 | Close Above Upper Bollinger Line |
| Long S/L Mgmt Value #2 | Upper Bollinger Line |
See how I made sure the price is actually above the upper Bollinger line before I moved the stop loss there?
It's the same with take-profits. Generally take-profits don't move so much, but again you have 2 ways to move them if you want.
Please note that stop losses will never be moved to a position of increased risk. In this example, if the lower Bollinger line moved down (for a long trade), the stop loss would stay where it was.
Take-profits can move wherever they like.
What defines a "complete" trading system?
Unfortunately there are many different combinations which make up a "complete" trading system. The most basic trading system is to have one Entry Rule, one Entry Value, and one Init. S/L Value.
While that is technically "complete", it's not much of a system. It's more "set and forget" - you set the order with a stop loss, and that's it. If the order is taken up, the only way to get out of the trade is for the stop loss to be hit (i.e. to lose money).
Generally your trading system will fall into one of two categories:
- A trading system where you set both a stop loss and a take profit, and wait for one or the other to be hit; or
- A trading system where you set only a stop loss, but you also set S/L Mgmt Rules & Values. Your stop loss will be taken out at some point, but you hope that by that time, your stop loss would have moved above above your initial entry price.
In keeping with that theory, here is what makes up a complete trading system. Either:
- Entry Rules
- Entry Values
- Init. S/L Values
- Init. T/P Values
Or:
- Entry Rules
- Entry Values
- Init. S/L Values
- S/L Mgmt Rules
- S/L Mgmt Values
That's the minimum - with either one of these, you are free to add any other type of rule you like.
You can't add a take-profit later if there wasn't an initial take-profit set.
Well, actually, Oanda lets you do this. But Gain Capital certainly doesn't. With Gain Capital, if you don't set an initial take-profit, you can't use the T/P Mgmt Rules & Values to add one after the trade has been entered.
(N.b. While you can't move a take-profit that doesn't exist, you can use the T/P Mgmt Rules along with a T/P Mgmt Value of Exit At Market even if there was no Initial Take Profit set).
How to hedge?
Most brokers do not allow hedging. If you go long 100,000 units, and then go short 30,000 units, the end result is you are still long 70,000 units.
If hedging were allowed, you would still be long 100,000 units and you would also be short 30,000 units.
This is important to know, because Thinking Stuff relies on each trading system being fully self-contained. If Trading System #1 goes long 100,000 units, it expects to close 100,000 units later on.
If, however, Trading System #2 has gone short 30,000 units of the same currency, there is going to be a problem. Thinking Stuff thinks Trading System #1 is long 100,000 units, and Trading System #2 is short 30,000 units. Your broker thinks you are long 70,000 units.
Moreover, if your trading system is not perfectly mirrored, the one trading system could be both long and short at the same time, and cause this same effect.
To get around this, and to do hedging, you simply open two accounts with the same broker. In Account #1 you do all your long trades, and in Account #2 you do all your short trades.
And instead of one big trading system that has both rules for long and short, you split it out into two different trading systems. Thusly:
Original (from above):
| Rule Type | Description |
| Long Entry Rule | MACD in overbought |
| Long Entry Value | Close plus 10 pips |
| Long Initial S/L Value | Entry minus 20 pips |
| Long S/L Mgmt Rule | MACD in oversold |
| Long S/L Mgmt Value | Exit At Market |
| Short Entry Rule | MACD in oversold |
| Short Entry Value | Close minus 10 pips |
| Short Initial S/L Value | Entry plus 20 pips |
| Short S/L Mgmt Rule | MACD in overbought |
| Short S/L Mgmt Value | Exit At Market |
New Trading System #1:
| Rule Type | Description |
| Long Entry Rule | MACD in overbought |
| Long Entry Value | Close plus 10 pips |
| Long Initial S/L Value | Entry minus 20 pips |
| Long S/L Mgmt Rule | MACD in oversold |
| Long S/L Mgmt Value | Exit At Market |
New Trading System #2:
| Rule Type | Description |
| Short Entry Rule | MACD in oversold |
| Short Entry Value | Close minus 10 pips |
| Short Initial S/L Value | Entry plus 20 pips |
| Short S/L Mgmt Rule | MACD in overbought |
| Short S/L Mgmt Value | Exit At Market |
Trading System #1 has only long rules set, and is attached to Account #1. Trading System #2 has only short rules set, and is attached to Account #2.
What if my trading system has multiple exit strategies?
For example, I know of a trading system in which you buy 3 contracts. The first contract is exited by use of a take profit, perhaps 10 pips above the entry price.
The second contract has a trailing stop-loss.
The third contract is exited when the reverse position is taken (the system was mirrored, and if in a long position, this contract would be exited when the rules for going short were met).
Or perhaps your trading system has the word "OR" in the entry rules:
- Enter long when the MACD is in overbought; OR
- Enter long when the RSI is in overbought.
It's important to realise that such rules essentially give you multiple trading systems, not just one. You have Trading System #1 where you enter long when the MACD is in overbought, and you have Trading System #2 where you enter long when the RSI is in overbought.
In the other case, you have Trading System #1 where you use a 10-pip take-profit, Trading System #2 where you use a trailing stop-loss, and Trading System #3 where you Exit At Market when opening a trade in the opposite direction.
And that's exactly how to set it up in Thinking Stuff - make multiple trading systems instead of one.
Can I have more than one system trading the same currency in the same account?
Yes, as long as you have one account for doing all your long trades, and a different account for doing all your short trades, there should be no problem having different systems trading the same currency in the same account.
Holidays
You can specify Holidays - times when Auto-trading will not trade in order to avoid the volatility that comes with major news announcements.
Further, you can automatically create the Holidays with a feature that uses the Forex Factory Calendar.
Accounts & Currencies
You can set the one trading system to trade in multiple accounts, and/or trade in multiple currencies.
Multiple Timeframes
A trading system's rules can all use the same interval, e.g. 5-Minute bars, or they can all use different intervals.
Alerts
Trading Alerts can be sent via email when an order is placed, an order is modified, an order is cancelled, a trade is entered, a trade is modified, and a trade is cancelled.
You can also create Alerts separate to trading systems, which send emails when the Rules you specified all evaluate to True. The Rules available to choose from are essentially the same as the Rules available to choose from when specifying the Entry Rules for a trading system.
So, not only can you set up an Alert to send you an email when the price rises/falls to a specific level, you could also create Alerts to fire when the Low of a bar is higher than an SMA. Or when the RSI drops below 20. Or when the Low of a bar is higher than an SMA -and- the RSI is below 20.