RR Reddit Mentions | ChartExchange

# From Nothing to Profitable: My Grounded Approach to Trading Strategy Design
Look, most active traders don’t fail because they’re lazy - they fail because they overfit, build strategies backwards &/or never collect enough data.
I’ve been there - chasing systems and setups that didn’t make logical sense or didn’t fit my schedule.
Eventually I stopped following bs noise and started building from nothing the way systems should be built.
I'm going to try to break this down step by step - not just the rules, but how I’d think if I were starting from next to zero trading experience.
Let’s say I’ve just decided to become a trader. I know nothing. I just have the will. Here’s what I’d do.
**Citations are visible at the bottom for context if desired**
# #1 I'd feel and adjust to my constraints first
**You start with what is possible for you, personally. That immediately rules out half the noise.**
* Time of day you can realistically trade (not **idealized** — **realistically**)
* Knowing in advance if you need to sleep or work through certain sessions & what that means for your trading execution
* Do you want to hold trades overnight or not & is it compatible with your system (yes or no, on a strategy-by-strategy basis)
* How much capital will you trade with (eventually)?
**Why? Because all rule-building happens within constraints.**
If you work a day job and trade 5m charts, you’re probably not able to trade the New York session. If you only trade during London session, you don’t build rules around Asian session. It really depends on time zones and other factors. Higher timeframes like hourly allow for higher versatility.
Ignoring constraints is why a lot of retail traders go nowhere – they copy others without aligning their system with their actual life. If you're "trading here and there"/"when I can trade, I do X," it's adding noise to your results. The more variance in consistency, the worse it is for your bottom line.
# 2. Pick One Market & Timeframe
**You don’t experiment with everything. Pick one instrument and one timeframe.**
For example: Dow Jones, hourly chart
**Why? Because markets behave differently.** Trying to make a system that works on Nasdaq, Gold, EURUSD, and Dow Jones at once is usually unwise. You will overfit or your strategy will break.
**One market. One behaviour set/trade setup.** If you want to run multiple instruments or setups/systems, split the risk amongst them. Each one should be good enough to isolate the risk and perform on its own.
**You must understand how your chosen market behaves.**
**Mean reverting, Alternating/Near Random Walk or Trending**
**Examples**
Mean reverting: Dow Jones/YM, EURUSD
Alternating/Near Random Walk: S&P 500/ES
Trending: Nasdaq/NQ
You can do research to know which is which but if you want in-depth you can ask AI to use Hurst Exponent & Augmented Dickey-Fuller (ADF) test over market data.
Or if you're into programming you can get python script to do it. ADF Visuals + Hurst Exponential Chart Example
[Mean Reversion](https://preview.redd.it/ebweokyun51f1.png?width=500&format=png&auto=webp&s=9da05df64d993f22b99f01d86ed93ae088650371)
[Random Walk\/Alternating](https://preview.redd.it/x5ow5hw6o51f1.png?width=525&format=png&auto=webp&s=7014c05e0ee75e15b40481bf05aa61206225e35a)
[Trending](https://preview.redd.it/ofe2lzszn51f1.png?width=525&format=png&auto=webp&s=4dd6eed15d594169e9489fc26c8347bc81ec0571)
[Hurst Exponent Visualised](https://preview.redd.it/xtm9gfr9o51f1.png?width=451&format=png&auto=webp&s=d4c739a2b5a05233a5b400685d31665a37dc606c)
# 3. Start Building with Logic, Not Results
**Start at the drawing board not the candlesticks.**
Forget indicators. Forget entries. First you need structure. Here's what to make rules about:
**1. Trade Time Window**
Define which hours are “valid” for entering trades, based on when your chosen market has high volume.
**Example:** 8am to 4pm NY time for US indices.
**Why?** Because you need volatility to reach targets & volume at your entries for price to trend in your favour regardless of your system style (reversals, mean reversion or trend trading).
**Ex. Rule:**
“I only take trades between 3pm and 9pm UK time.”
You can mark this with a sessions indicator (e.g. "Sessions on Chart" on TradingView, 10:00 to 16:00 setting).
# 4. Risk Management
**Decide what you’re risking per trade.** Fixed % (e.g., 3% of account).
In a live environment this value can be based on risk tolerance. It can be arbitrary but must be logical, planned ahead, and stuck to. Your risk can be static or dynamic.
**For prop firms, you must calculate your risk to fall in line with the maximum drawdown rules.**
The Amount risked has to be calculated with maximum drawdown & maximum daily drawdown in heavy consideration.
For example, someone may have a system with a loss equivalent to 10 losses in a row -10R maximum in testing his prop firm allows up to 10% maximum drawdown so he decides to trade 0.6% per trade allowing him to have space for that maximum peak to trough drawdown + 50% extra.
**Dynamic example:**
More Aggressive traders may opt in to having pre-defined plans to increase risk during winning or losing periods in live environments depending on their risk tolerance & goals.
**Decide what your target-to-stop-loss ratio is before testing the system and stick with it (e.g., RR: 2:1, 5:1, etc.).**
Don't adjust this to get better trading performance - pick it based on logic, not data.
Ex. Rule: “I aim for 4-5R on all reversal trades" &/or "3-4R on continuation trades.”
If the system doesn't work, I throw it out.
# 5. Entry Style (Define Setup Type)
**Bar Replay backtest only**
**Pick something linear and logical.**
Mean reversion? Reversals? Continuations? Breakouts?
Then ask: **What does that look like?**
Do I want price to hit a level and reject (reversal)?
Do I want price to push through and pull back (breakout/continuation)?
**And why would it work?** What does my setup signify via **order flow mechanics**?
**Order flow isn’t a system or strategy like educators teach.**
**It’s the basics of how markets move on a tick-by-tick basis.**
**Basic Example explanation:**
If there's a buyer at $10,000.25 who wants 100 units, but only 80 are available, price moves up one tick to $10,000.5 to fill the rest.
**Ex. 10000.5 50 available 10000.25 80 available**
He gets **80 filled at 10000.25 and 20 (the rest) at 10000.5**
(10000.25\*(80/100))+(10000.5\*(20/100)) = **10000.3 average**
price fill -> price increased to **10000.5**
**This is liquidity.**
**The only reason price moves is that there’s an imbalance between buy and sell volume. Nothing else**
**Example purposes only: 3-wick reversal**
https://preview.redd.it/dhn5o6aap51f1.png?width=498&format=png&auto=webp&s=9b60b350dbb6f277dded44eec553b5bfcbf4c515
**3 Wick Entry Rule example purposes only:**
“I place limit orders at the beginning wick of a 2-wick consecutive rejection if it forms and closes during my valid trading hours.”
3 – Sell Limit Filled, Limit order pulled/expired if no fill on **bar 3**
**Short example using Order Flow Mechanics Knowledge:**
A wick high in a candle is rejected by the next candle and it closes. Sellers were present at that wick. Regardless of how the "Order flow" had taken place it is **irrefutable**.
If price revisits that price or higher and fails again, closing, I want to sell at that price - expecting a third rejection.
**Sell limit order fill, Bracketed with SL & TP (values known before the close)**
Vice versa for long setups.
**Most people who overcomplicate with “smart money” or “institutional”. Talk are waffling.**
# “If you are using charts to execute, you aren't smart money but you don't have to be dumb money either.”
**Dismiss educator narratives on why their methods supposedly work and use critical thinking applying Order flow mechanic basics to accept or dismiss trading entry ideas.**
**Don't sleep walk into the "institutional" narrative fallacy’s educators sell you. Think about why price moves on a tick by tick basis and what the candlesticks you're basing your entry off actually indicate.**
**Markets aren't ruled by patterns they're ruled by imbalances that's what fuels trends. Without an imbalance price won't move.**
**If a setup doesn’t have logic like this backing up why it would succeed enough for it to be profitable besides randomness, you’re wasting your time.**

# If your only answer to “why does it work?” is “my backtest says so,” you’re doomed
**I’ve asked a trader why he believes his system works besides his data and silence followed for minutes whilst he tried thinking of what to say. I shown him random OHLC candlesticks with his strategy applied and he thrown in the towel. Don’t be like this.**
**Examples of what not to base your system on:**
* Pivot points
* Fibonacci (**Based on faith and crowding**)
* MA bounces (**Random and seen on many data sets**)
* Complex multi-timeframe analysis (**Hard to quantify and bar replay backtest honestly without hindsight fogging vision**)
* Most indicators for entries
These methods are 1000% random with weak foundations or are purposefully hard to test accurately and honestly without overfitting. **Educators push it for plausible deniability when systems don’t perform. A model is hard to hold to account if there’s 1000 ways to trade it. The use of Multi time frame analysis in trading is fine as long as it’s not convoluted, has clear rules and is tested properly.**
# 6. Target & Stop Loss Placement
**Targets must be placed consistently.**
Targets are typically less important than entries and stops – but still important.
If using price structures (e.g. support/resistance), **define the logic first**, then the rules.
Ex. Someone could use swing highs/lows, support/resistance,
clustered wicks or rejection zones. **With fixed rules to define and mark them in advance.**
Price will naturally attract volume at these levels, **even if the instrument's order book volume doesn't reflect it in real time**. Ghost limit orders exist, pending stop orders & order fill algorithm triggers from **countless market participants for different reasons** it doesn't matter what happens when price interacts with these places it's just more often than not that they are **liquid areas**.
**Avoid fixed-distance targets - market volatility is dynamic.**
Ex. A "100 point fixed stop" isn't going to work
It's better to use dynamic yet consistent targeting methods
Ex. One trade = 110 pts, next = 160 pts, next = 140 pts. Placed at pre-defined levels.
**Fixed targets overfit strategies easily.**
Your **execution costs** must be factored into your system.
Ex.
If you use a 5:1 RR and a 100-pt target minimum, your minimum stop is 20 pts.
If your max spread on your CFD is \~2pts, that’s 10% cost per trade - before everything else which matters.
Ex Rule:
“Target is always ≥100 points for Dow. Stop is one-fifth of target.” - Why? Because it keeps costs at a modest level.
# 7. Instrument-Specific Rules
**Some markets behave uniquely. You don’t need deep stats – just basic experience.**
* Nasdaq trends
* Dow mean reverts
* S&P 500 alternates. (Trending but Near random walk)
* Gold is erratic
Example: If you want mean reversion or early trend entries, Dow is a better choice than Nasdaq.
# 8. Start from Blank Charts
Instead of top-down start bottom up.
People look at charts for ideas when you need to **consult logic for inspiration**; **not recency biases from recent price action**.
Back testing is there to put an idea to the test.
**Before building rules based on the chart, define a hypothesis.**
**Example:**
**“What if I traded Dow Jones reversals using 3-wick setups with a 5R limit entry?”**
Then test this visually. On charts
**You’re not trying to make it “fit,” but to ask:**
*- Does this work during valid hours?*
*- Does the visual match my logic?*
*- Does the reaction make sense knowing Order flow’s nature?*
*- Would my setup realistically hit target often enough to net a profit over time?*
**Only then write rules to test.**
# 9. Write Rules as If You’re Giving Them to a Machine
**Your rules must be:**
* **Objective**
* **Actionable**
* **Not open to interpretation**
* **ex. If you risk $100 and your RR is 5:1 but after adding spread, comms and other costs it’s >3.5R / >70% of R realised minimum** / >$350 minimum on each 5R setup
**Bad Rule:**
“If the market is ranging, I don’t trade.” **(No definition for range or how to identify it)**
**Good Rule:**
“If a 3-wick setup forms between 3–9pm UK time, and the high/low of setup is beyond/below \[X filter\], place sell limit at top wick or buy limit at low wick.” **(Rule based intuition/discretion free)**
**Define everything clearly** \- the filter, logic, conditions, etc.
# 10. Stress Test the System by Breaking It
**Once rules are written, test them brutally.**
Ask:
\- Is this rule based on **logic** or **emotional comfort?** **Be emotionally detached**
(ex. Breakeven or partial profits reduce strategy net profit - so why use them?)\*
Partials or Breakeven reduce strategy expectancy more often than not\*
\- Does it work over 3+ months of data? (Depending on timeframe)
1R = 1 unit of risk ex. 3%
Log the data, process it -1R+4R-1R-1R+4R
[5m chart reversal strategy spreadsheet crop](https://preview.redd.it/l27p3047r51f1.png?width=1160&format=png&auto=webp&s=fba53786a5d89e438f12282ee917879316669df5)
# - What if market conditions flip? (Test on conditions against the system's nature)
Test mean reversion and reversal systems on trending weeks & if you're trading trend trading systems test them on mean reverting/ranging weeks. See your system struggle. Example (Surface Level)
[Archive Folder $source and age$](https://preview.redd.it/d5sa6bgdr51f1.png?width=644&format=png&auto=webp&s=861f76108c7b30db4da67367160807222a1fecc7)
[1 was a positive outcome and 0 was a negative outcome for the test on display\*](https://preview.redd.it/kwaarq5er51f1.png?width=438&format=png&auto=webp&s=539ff3fa42adb66f36ff6cd1ec831424a83b1d78)
**- What if trading costs rise 20%? (Reduce size of profits by \~20%)**
\- after the initial rejection candle close if there is an additional rejection should I scale in/increase the risk on the trade (Entry 2 typically has higher win rate vs Entry 1 when scaling in for my systems**) testing will confirm whether it's worth doing**. **To scale in or not to scale in**
Scaling in is only worth doing is the win rate if Entry 2 is superior to that of Entry 1 ex. 45% winrate Entry 2 vs 40% winrate (main entries) most systems don't benefit largely from it so **be careful.**
**Entry = Individual Trade Execution (filled with 1R risk per trade ex, 3%) 2 Entries = 3% \* 2 = 6% for example.**
**- Should I hedge or wait until my position is closed to enter setups on the opposite direction?**
**-Is it worth holding overnight?**
**-Do I have enough leverage/margin to trade this strategy on my broker or prop firm of choice (find out the leverage needed maximum per trade with stop distance % relative to % risk per trade desired)**

**You're not seeking perfection, but robustness.**
**If a small change breaks your system - it’s overfit noise.**
# Bonus: When in Doubt, Zoom Out
**Ask: Does this decision happen every trade?**
If yes, write a rule. If not, STOP, think, and evaluate the logic.
**You should:**
* **Know your risk % – make a rule**
* **Know your stop – make a rule**
* **Aim to know target, stop, and entry price(s) before the candle closes (Bracketed limit orders help a lot.)**
# Bonus 2: Market Randomness
https://preview.redd.it/d4deq34yr51f1.png?width=814&format=png&auto=webp&s=43683250c8c9349dbca4116e8f62168fded91a9a
**No Edge is possible on this chart it’s 100.00% a random walk but very similar to a real market**
**I’m not saying the market is efficient, I’m saying it’s very close so you need to be refined in your approach. It’s not a choice**
# TL;DR Mindset:
**Structure before everything.**
**Logic before data.**
**Consistency before optimization.**
**“Why” before “What.”**
**Every rule is based on:**
1. **What you can realistically do**
2. **What the market allows** (ex scalping CFDs is usually not a viable strategy due to higher or exaggerated costs on higher lot sizes)
3. **What gives clear, repeatable decisions**
**You don’t optimize to improve win rate or net gain.**
**You optimize to enhance the logic behind the system – which often translates to improved performance (net gain)**
**Yes – the first 0–20 hours (first few testing sessions) will feel foggy. Then it clicks.**
**You’ll never know if it works until you test it exactly as written.**
**That’s when the market becomes your teacher.**
**If a system implodes/stops working it doesn't mean a different variation of it can't work again in the future.**
# This is the guide I wish I had when I first started.
# Thanks for reading – Ron.
**Citations:**
[https://www.reddit.com/user/SentientAnalyser/comments/1knq2xn/sentient\_trading\_society\_favourite\_citations](https://www.reddit.com/user/SentientAnalyser/comments/1knq2xn/sentient_trading_society_favourite_citations)

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