NEW YORK (TheGoldAndOilGuy.com) -- When it comes to becoming a successful investor, or an automated-trading-system developer 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 three to six months. For example, you might have a goal to develop two trading strategies over the next six 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 should be your 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 basis.
Having a Step-by-Step Process
If you're like most investors, you are developing your trading strategies and automated trading systems without following a well-defined process and understanding the steps and order things need to be executed in for trading-system mastery. If this is you, time 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 checklists 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 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 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 blueprints for my programmers.
Don't Get Distracted, Have Laser 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. 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. Trust me, this will do wonders for your progress and mind frame.
There Is No Get-Rich-Quick Trading System 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.
There are some traders out there who actually turned $10,000 or $50,000 into $4 million within 12 to 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.
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 reading 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. Your system will never be perfect and it does not need to be perfect to make money.
Do Not Ever Fool Yourself or Fudge the Numbers
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...