How to develop a trading system, evaluate it and then apply it with real money. There are many factors to consider in a mechanical trading system.

We need to not only know that the trading system is profitable but also whether it is profitable with limited equity swings. Does the trading system have excessive drawdown periods?

Three of the most important elements of mechanical trading systems are: 1) Rules for exiting at profit targets. 2) Rules for exiting at loss targets or how much loss is permissible and 3) Clear cut rules for entry and exit for each trade.

When a string of multiple winners and substantial profits accrue, does the trading system experience periods of time that result in significant losses that give back those gains? Do losses exceed gains more than what is tolerable?

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