In this article, we will be explaining the basic functioning to define the rules of tradEAsy.
First of all, we should know that in all trading systems we need at least one entry rule and one exit rule.
Entry rules are useful to define the conditions that have to happen in the market in order to open orders.
Exit rules are useful to define the conditions that have to happen in the market in order to close orders.
Having this, the rules are set by conditions. These conditions are configured in tradEAsy with what we call elements.
An element is a unitary condition that can be linked with a technical indicator, it can be linked with determined levels, with the characteristics of a market order, or with time elements.
A rule can be configured by one or more elements.
For example, we can define an entry rule based on the moving average, with the price average crossover element. Moreover, if we want our entry rule to be only for crossovers between 10 a.m. and 2 p.m., then we will add a second element, the time filter, to our rule. Therefore, by combining the price average crossover and time filter elements in our rule, we will get a result.
A usually mistake is wanting to define 2 exit rules, but instead, creating one rule with the 2 conditions.
For example, imagine we want a system that closes if it achieves 50 benefit points (take profit) or closes if it loses 10 points (stop loss).
If we place the 2 elements in the same rule, what we are configuring is an exit rule that is activated when we have an order that gains 50 points and loses 10 points, which is contradictory, since an order can only be at benefit at or loss.
The correct form to configure this scenario is to use 2 rules, one rule for the profit condition, and a second (independent) rule for the loss condition.
When we have several elements in the same rule, we are adding conditions for that same rule: when A + B + C (the three at the same time) happens, my rule will be activated. Something completely different than if we have 3 independent rules: when A, B, or C happens, then each rule associated with each element is activated.
This is an easy but key concept! Understanding it will give you a lot of facilities to be able to start taking advantage of tradeasy!