Trading 101: The Minimum Viable Strategy

Credit 5glitchers5

Entering or Increasing a Position

For the MVS, the entry decision is the most familiar and easiest to think about. In case you have examined what makes a market move, then you have already started to think about how to enter a market. This part of the framework refers to both the signal that gives you an idea of where the market will go, and the execution that turns that signal into an order, either manually or algorithmically.

Managing the Strategy’s Risk

Once you have the entry signal, you now have to make a decision on the risk you are willing to take. Although it could be tempting to just keep executing your signals (e.g., buying whenever you receive a bullish signal), you are probably going to want to place some limits as there will always be a chance you could lose most, if not all, of your capital.

Exiting or reducing a position

Knowing when to exit a position is often the most difficult part of the MVS framework, and some novice traders may not immediately realise its importance. Unfortunately, it might only become apparent when a trader consistently loses money despite an exceptionally accurate entry signal.

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