We read books after books on Value investing, , , so many other indicators, follow blogs and forums, and yet many of us still feel as if we are in a maze with little clue on how to get out of it.
Had trading been so simple, everyone of us would have become rich. What comes in our way of realizing our dream is basically a good trading system. W e keep searching for one, try diiferent indicators, , channels, ellott waves, Fibonacci and everything else but sadly many a times the goal still remains elusive.
How to find, evaluate and get started with a good trading system? This exactly is the purpose of my writing, want to share with you all the principles using which I found and built my own trading system Timewave.
(1) First and foremost, always forward test the system before deploying any money on it. Everyone talks about back testing, but in markets things always seem easy when the move is already over! If you had been in trading for a little longer, you must have already realized this. By forward testing I mean test it in real live market.
(2) Before you forward test, do some back testing, if its failing in the back testing itself, of courseit will fail in forward test as well.
(3) If the system does give some losses as well sometimes apart from profits, which of course it will,
then devise money management rules. Think if system does give 3 losses in succession, will you still have money to deploy to make it all in the fourth trade?
(4) Maximize the percentage of winning trades and minimize the amount lost in loosing trades.
(5) System shall not have any ambiguity. If taught to 5 people, they all shall arrive at same result. This is very very important otherwise you will remain confused during market hours and loose money.
(6) Do not look for fun from trading. For fun there are other avenues in life. Looking for fun will promote gambling instinct in you and you will become a gambler rather than a trader who trades only for profits. Remember that gamblers seldom become rich. Pandavas have lost even their beloved wife in gambling (Mahabharat).
(7) If you cant win against them, join them. If you find someone who trades better than you, is quite good at it, there is no harm in following and learning.
I just thought it would be helpful for you to jumpstart your career in trading. Have a nice weekend!
Rest assured I am always here to support you all and will continue to provide end results of my calculations. Love you all!