Trading System DevelopmentFrom a Novice to a Profitable Investor
When it comes to becoming a successful investor or your, automated trading system development process for that matter, there are some big picture things that you must have figured out. Here are some tips that will help you get started in becoming a long term consistent and profitable trader, investor or automated trading system developer.
Having A Master Plan
I’m not talking about a detailed trading plan, but a plan on what strategy or automated system you want to develop over the next 3-6 months. For example, you might have a goal to develop two trading strategies over the next 6 months. One strategy for uptrends and the other for downtrends.
Making money in both market conditions is crucial for long term success and these two strategies you should be focus. All your strategy development should be focused on reaching these two primary goals.
This master plan does not necessarily need to be detailed. It is simply your reminder to keep you focused and on the right path. You should probably review your master plan on a weekly bases. For more information on why having a master plan and treating trading as a business is important see Brian’s course which I took myself also… Trading As Your Business.
The Trading System Development Step-By-Step Process
If you’re like most people you are developing your trading strategies and automated trading systems without following a well-defined process and understand the steps and order things need to be executed for trading system mastery. If this is you, then you need to focus and figure this process out before doing anything else. You are probably missing trading opportunities, wasting time and spinning your wheels wondering why you are not seeing progress. I’m going to give you a recommendation that can really boost your effectiveness as a strategy or automated system developer.
You must create a process on how you build and test your trading strategy. Your system development process should explain how to test and what to test. It should describe the order and flow of your development process along with check-lists on what types of orders should be used for stops, targets and exits.
Using a documented system development process will provide structure and discipline so you can get your trading system built, tested and making your money in a much shorter period with less frustration.
In short, it will do wonders for your system development process. “Trading System Mastery – by Brian McAboy” is a fantastic starting point on building your own trading strategies and automated trading systems. I took his course a few years ago to help refine my trading goals, rules, and automated trading system blue prints for my programmers. Brian and I now talk weekly and are good friends.
I’m also working on explaining this development process in more detail. When I finish I will send you an update.
Don’t Get Distracted, Have Laser Beam Focus
Distractions and procrastination is a big problem for many of us. We get distracted from what we are doing very easily. Anytime you find yourself starting to wander from your task of building, testing and running your first system, ask yourself if what you are doing is getting you closer to your goal.
Don’t start chasing every new trading idea, concept or indicator you read about, I know… It’s easy to do and exciting but DON’T! Do what I do, make a detailed note with all the thoughts you have on that idea so you know that when you finish with your first system, you can go back, review your notes and look deeper into that idea you had. Trust me, this will do wonders to your progress and mind frame.
There is no better feeling than seeing progress on a trading system and knowing you have 5 -10 other great ideas on paper to work on next… The sky is the limit, but focus on one idea/strategy at a time.
There Is No Get Rich Quick Trading System – Not many…
We all know there is no consistent get rich quick trading system, but there are some that can make you wealthy within a year if the stars align and you are extremely aggressive. What I am referring to are the futures compounding strategies some of the lucky traders were blessed with.
Yes there are some traders out there who actually turned $10K or $50K into $1, $2, or $4,000,000 within a 12 or 18 months. But they are few and far between. This type of trading requires 100% risk capital and you more or less win huge or lose it all, although I am working on a very exciting project now on how to do this with very little downside risk using one of my intraday futures trading systems. I will update on this in a few weeks once I have more solid numbers.
Anyway, back to NOT getting rich quick…
You need to expect the journey to financial freedom to be painful at times but if you follow your proven systems your success can be consistent and that is what is important. You will make mistakes and the markets will humble you at times. There are no free lunches and you will work for a strong return on your investment.
Money Management – Manage it or Lose
Once you have a solid performing trading system, you will need to start learning and testing out the best way to manage positions. This is also known as money management. Doing so can really leverage your system or simply be the difference between it making money or not. I recommend read a book or watching videos on money management on how to scale in and out of positions as that is the key to success I think.
Don’t Wait Until It’s Perfect
Perfection does not exist with any trading system. The financial markets are always evolving and you will have losing streaks and winning streaks. Just make sure the system is working correctly. Test it in simulation mode and start trading it with small amounts of money. You are system will never be perfect and it does not need to be perfect in order to make money.
Do Not Ever Fool Yourself – Fudging the Numbers is a NO NO
Do not attempt to fudge numbers while testing your trading system. Be honest in your backtesting reports and manually review all backtested trades for completeness and accuracy. General rule of thumb… double your commission costs, and factor in 25% slippage. This may sound crazy but you will be amazed at just how accurate these numbers will be with your real-time results with real money.
If your automated trading system does not post gains with commission fees and a 25% slippage, then continue to improve your trading strategies. Set Goals, Reach, Repeat… and nothing less…