Things to consider before trading
1) Before trading with real money, wait until you have a system or strategy that you’ve backtested and forwarded tested successfully. If you are trading without a system/strategy, you are just gambling. I’ll show you examples of systems/strategies in future posts. Yes, this is easier to do with an automated system, however, it is also possible to backtest discretionary systems/strategies. It just takes a little longer. Remember this: It is not ok to blow up your first account.
2) Once you “think” you have a strategy, trade with a small fraction of what you have. Trade very small. Forward testing with papermoney is different than forward testing with real money in my opinion. It’s a psychological thing. If you are successful with a small amount of money for a few months, then try adding a little more. If you aren’t successful, then go back to step 1 and refine your strategy or come up with a new one.
3) Do not believe everything everything you read on the Internet. For example, people selling “strategies”. Most people selling systems/strategies are making more money by selling the system than with the system. These systems need to be backtested, but more importantly forward tested. Some sites do have forward testing results. I’ll talk about these later. I’ll also discuss why you have to be very cautious of backtesting results.
4) Don’t believe all the talking heads on TV. For everyone saying go long, there’s another saying go short. Try to listen to both sides if you insist on watching.
5) Don’t believe everything you hear at a seminar. Be careful of paying anything or buying anything during a seminar. Do as much research outside of the seminar as possible.
6) If you insist on trading Forex or Futures, be very cautious. The leverage available can wipe you out real quick if you don’t have proper money management or a proper strategy. There’s a lot of advantages of trading Forex, but there’s a lot of disadvantages as well. Yes, it’s possible to make money with it, but without a proven system, you could easily lose it all. Money management is the key to trading everything, especially Forex and Futures. The leverage available in Forex wipes out most traders.
