How to Build a PROFITABLE Trading System?

Hello friends, welcome to my YouTube channel. If you are interested in the stock market and want to generate an income source from these stock markets, whether you want to generate an active or passive income source, or become a profitable trader, then this video is for you. In this video, we will not discuss any setup strategy. How do you build a trading system? How do you build a profitable trading system? We will practically show you step-by-step how to build a profitable trading system. So, you will get a practical reference from there. And literally, when I started trading 7-8 years ago, at that time, I didn't have any trading system, nor did I have any idea how to build a trading system. And there wasn't much content on YouTube at that time, so it took me a long time to build a trading system, two to three years. I had to backtest a lot, so I had to finalize it by backtesting, which took me 2-3 years. As it is, see, we are sharing that with you. So, what took me 2-3 years, if you watch the video till the end and follow the steps, you can build a profitable trading system in 90 days. What do you have to do? You have to backtest. You have to backtest what I will tell you and finalize it according to your suitability. And your system will be built. A profitable system will be built. And once your system is built, a profitable system is built, you don't have to do much afterward. You have to act according to the system. In between, you will have reviews, and you have to see how to scale. So, watch the video till the end. Like the video, share it. So, let's start the video. So, see, this system we have developed. We maintained this Excel sheet. So, as it is, we will discuss step-by-step. In the steps, see, there are many sub-categories. I will also tell you which ones I finalized after testing. So, you will get a reference from there. Your time will be saved. This system we have developed, you can apply it for every category. Whether you are doing swing trading, day trading, or investing, you can apply it for every category. Only your trading style will be different. Your trading time frame will be different. It will be different. First, what do you have to do? You have to select a category. So, to keep the video simple, I am discussing it for swing trading. So, suppose you want to do swing trading. I have selected the swing trading category. So, in the swing trading category, you can do swing trading in stocks, indices, or ETFs. So, you have to select any one niche. So, personally, I do swing trading in stocks and ETFs. So, my suggestion would be, if you are a beginner, start swing trading with ETFs. So, you will have a good success rate there. Your risk will also be less, and it will take you less time to become profitable. The second step will be our selection method. So, if you are doing swing trading, your future trade's success and accuracy depend on the selection. If your selection is correct, then your further process is correct. And if your selection itself is flawed, then your rest of the process will not be good. Your accuracy will be flawed. So, selection is important. So, what method should be used for selection? So, see, we can do selection based on technicals. Technicals mean based on charts, candlesticks, graphs. You can select stocks based on that graph. And there is also fundamental-based. Fundamental means the company's balance sheet, financials. You can select stocks by looking at that. And you can also select stocks by combining both. You can select by combining both technical and fundamental. So, I was selecting stocks based on technicals until now. But now I am selecting stocks by combining both technical and fundamental. My suggestion would be, if you are doing it for swing trading, then technicals are sufficient. It is okay even if you select stocks based on technicals. What is the significance of the system we are discussing? See, if you build a trading system and work according to it, you will remain disciplined. You will not have impulsive decisions. Your risk management will be good. And even if you make a mistake, it will be easy for you to identify where you made the mistake. And it will be easy for you to take action. You will identify the point where you made a mistake, so you can take exact action at that point. So, there are many advantages of a trading system, and without a trading system, it becomes like working randomly. So, if you develop a system, it is best. Then the third is the setup, based on price action, like support and resistance. I will not go into its details. We can make more videos on details. If you want a detailed video related to the setup, then type "setup." If you want details on selection, then type "selection." I will not go into the details of how to do stock selection or setup. I will just give you the road. If you want details, comment me. I will bring videos on those details as well. There is a setup based on support and resistance. Then there are many price action patterns. There are many patterns like range-bound patterns, SL patterns, W patterns, M patterns. So, you can backtest any one setup. And the setup on which you feel the accuracy is good, you can finalize that. Then there is your indicator. You can also build a setup based on indicators. You can build any setup. You can also build a setup based on EMI, on moving averages, on moving average indicators. So, that is according to you. So, you will need some backtesting for this. So, which setup do I follow? I follow it based on price action patterns. And in that, I use the range-bound setup, the box pattern, which trades in a range. When it breaks out of it, a range-bound setup is applied there. I mostly take trades on that pattern. And for reversals, I trade on the blue pattern. And I have traded multiple times on these two setups. I know their accuracy. I know where it will fail and where the success rate is good. So, you also have to backtest and finalize such a setup. Then you have to repeatedly take trades only on that setup. Next will be the buying method. Buying method means on what basis you made your entry, that is the buying method. So, for the buying method, see, there are many methods. One is the pullback method. Suppose your setup is applied above a level and it breaks out, then when the price comes back to that level again, to the breakout point, and pulls back, at that time, your entry is made. So, that entry is called a pullback entry. And one is a breakout entry, meaning you entered on a running breakout candle. And another is, say, an EMI-based entry. Meaning you are following a breakout pattern, and you have applied an EMI, say, a 20-day moving average. When the price, after breaking out, comes near the moving average again, retraces, at that time, your entry is made. So, mainly these are three methods. Which one do I follow? I mostly follow pullback entry. After breaking out, when it pulls back a little, I enter at that time. The tip will be our stop-loss method. Meaning risk management. You took a trade. On how much risk did you put it? On how much risk did you take that trade? What is the maximum risk you can take on that trade? Capital-wise or percentage-wise, we can mitigate that risk by applying a stop-loss. So, there are many methods for stop-loss as well. One is your price action-based stop-loss, meaning you can apply a stop-loss based on support and resistance. As I discussed earlier, for pullback, if you entered on a pullback, then the breakout level will act as support, so you can place a stop-loss below the support. So, this is our price action-based stop-loss. Second is percentage-based. So, you have decided beforehand, say, that I will take only 5% risk in this trade, or 7%, or 10%. So, that is your percentage-based stop-loss. Then there is also a risk-based stop-loss. Suppose your risk-based stop-loss calculation will come from your capital. So, suppose you have 5 lakh capital, so in that 5 lakh capital, how much risk will you take per trade? Suppose there is a risk of 5000 per trade, so for a 5000 risk, where is your stop-loss coming, so by back-calculating that, you can define the stop-loss. So, this is risk-based stop-loss. So, which one do I follow? I apply stop-loss by combining price action plus risk-based, both. If you want a practical detailed video on this, comment me. So, I will bring a video on that. Then next will be your exit method. Exit means profit booking method. So, suppose your stop-loss is not hit, and the trade goes in your direction, then where will you exit? So, for exit, as we discussed for entry based on price action, you can follow the same for exit. Like, when it goes near resistance, you can book profits there. Or you can also do it on a percentage basis. Meaning, suppose you took a 5% risk, then against that, you want to take 15% profit, 20% profit. Meaning 1:3, 1:4. So, you have to take profit accordingly. So, this is your RR-based target, RR-based exit. And another is trailing stop-loss. As it moves in your direction, you can gradually shift the risk, meaning you can shift the stop-loss upwards. So, whatever profit comes, suppose it went up by 20%, then you can trail the stop-loss at 15%. So, you have locked in 15% profit. So, you can apply that method as well. Which one do I follow? I follow RR plus trailing stop-loss, both. I follow them by combining both. Combining means, see, I took a trade. In that, I got 1:3. So, I trail the stop-loss at 1:2. Then I got 1:4. So, I trail at 1:3. So, I apply both by combining them. So, I have told you my system. So, in this, see, risk management is very important. Risk management, see, as we maintained risk-reward for entry and exit, your risk management will come there. So, if you follow this trading system, you will become disciplined. You will not have impulsive decisions. Emotions will be under control. So, there are many benefits. And developing a trading system is a must for a trader. So, hope you found the video informative. If you found it informative, then like the video, share it. Thank you for watching. See you in the next video. Thank you.