Section I: Where to go from here
In this section, we will review some steps you need to take before you start risking real money trading your system.
Step 1:
The first step is to test your system on a demo account. Most Forex brokers offer a demo account (virtual money). This is an excellent choice to test your trading system as there is no money at risk. In this step, you will figure out if the strategy works for you. If you feel comfortable trading it, then it is more likely to produce good results. How much time should you stay in this step? It varies, it depends on the frequency of your trading signals, but you should not go one step further until your system gets consistently profitable results over a significant sample of trades. It can take many months, but you need to be patient. If you don't get consistent results, it is suggested to go back and review your strategy because it is not likely to achieve consistent results in your real account either.
Step 2:
The next step is designed to deal with emotions and to confirm the results obtained in the prior step (consistent results in a demo account.) In this step you need to trade a real account with limited funds. Some brokers offer fractional lot trading. Meaning you are able to trade any desired amount (even cents), other brokers allow you to trade mini-accounts. What is important here is that these emotions we’ve been talking about are present only when there is real money at risk. At this stage, you are going to see if you are really comfortable trading your system.
Step 3:
The last stage is trading in a real account with sufficient funds. If you are at this stage, and have passed successfully steps one and two, go ahead and try it, you need to be confident in yourself and in your system, your strategy must have already produced consistent profitable results, these are reasons to believe you are going to make it. Very few traders fail at this stage (if passed successfully prior stages.)
1. Market Uncertainty: Every single moment in the market is unique, there are only similar patterns (not identical patterns), the outcome of any pattern is unknown. However, we don't need to know what is going to happen next in order to make money; we only need to take the trades our system signals, in the long run the probabilities will play in our favor.
2. Trust and Commit to Your System: You have created your system, you know it has an edge, whenever it signals a trade there is a higher probability that the market goes in the intended direction, the only work you have to do is to follow it. Take ALL signals (nothing less) generated by your system; it is the only way you are going to gain confidence. And believe me, confidence is a very important component when it comes to trading successfully. If you went through every step in the process to test your system and finally got to the last one, then you should be confident about your system, it has produced good results, if you follow it consistently, it is likely to produce good results in your trading account with sufficient funds.
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