You will lose. That is a fact. You will lose due to simple probabilities and you will lose due to trading errors. Learning from the losses you can control is one of the keys to becoming a consistent trader. Winning, by following a proven system and plan, takes care of itself. Winning that way, you continually learn that your plan is good and you increase the confidence in trading the system and plan. Trader error losses is where you really mature as a trader. How? By correcting them.
September 2009
For those new to backtesting, it is an extremely worthwhile mission. It requires intense focus and does take up a lot of time. The market can take up lots of your capital so it is one way to at least come armed to the battle with something other than bare hands.
I never traded the EURUSD on any other system so today, I started backtesting this currency pair. I chose my timeframe, my stop placements, my trade management plan and went to work….candle by candle.
Even with only a handful of trades, I learnt a lot. When the market intends to go in my direction, it will either do it quick or meander around. I wanted to give the trades time but also wanted to ensure my losses were minimum when the market did something else. I liked a distant stop off the top and a fast decrease in risk when it moved in my favour using objective areas. I felt very comfortable adjusting around certain levels especially when key levels (swings, round numbers) were in the same area.
I need about 20 more trades to decide if this is a pair/timeframe/plan I want to continue a bigger sample with. Still, the expectancy on this small basket points to what could be a profitable addition
How do you know you will succeed with your trade plan? How do you know if the system you are trading has a positive expectancy? What is the best way to learn your system inside and out?
Manual backtesting.
It is a very time consuming process but a process that can spell the difference between an increase in your equity or the loss of capital.
This video is going to cover using the “hard right edge” of the screen to simulate real world trading. Bar by bar or candle by candle, you trade your plan. Think win rate is the prime indicator of your success? Wrong. I will briefly cover “expectancy” and R multiples but that entire topic is beyond the scope of this video. You will pick up the basics and that alone will give you the “long run” potential of your trade plan.
The suggestion is to do a minimum test of 30 trades to get an quick idea if you are on the right track. If the 30 is looking good, you can expand your test to include many more trades…100-200. This will help alleviate the “law of small numbers”. This is where a trader will say “I used the stochastics for the last week and won every trade!” They then use it from that day on without proving out the long term potential.
In the end, you want to focus on the big picture. Many traders suffer from recency bias where they will focus on the few losers in recent memory. Conversely,some traders focus on the recent winners using filters missing out on the longer term past showing it either failed or made very little difference. Backtesting will give you confidence and a concrete shot at trusting your plan and trading it during the good and bad. That is the KEY.
Backtesting is not perfect. But what are the other options
The entire goal in becoming a trader is generally financial independence. Sure, some do it for some extra cash but many have the dream of ditching 9-5 and doing what they want.
Today’s trading highlights the possibilities of having a proven system and a capitalized trading account. Many know that I advocate a minimum $5K to start your trading stake. The system? HVMM. With the power of compounding and a positive expectancy system, your goal could be closer than you think. What else do you need? To understand trading psychology. Topic for another post.
This video cover’s the “out of the box” HVMM trades for today. Utilizing POQ, 10:02 est is the end of your work day. Speaking of HVMM, I heard that as of Thursday, it will be off the market for an indefinite time. While the main page of the HVMM says “Sold Out”, you can still grab your copy with these two links:
UPDATE: HVMM IS SOLD OUT UNTIL FURTHER NOTICE
1. http://www.atradingplan.com/order (1 time payment – cheaper)
2. http://www.atradingplan.com/3easy ( 3 payments)
Hopefully all your questions were answered during the stellar Q&A webinar Tuesday for the HVMM. If you missed the webinar for whatever reason, visit the sign-up page for more details.
http://www.atradingplan.com/velocity
(NOTE: it says the system is sold out, but I have some SPECIAL links for you at the end of this post.)
Just be warned that this is your LAST-CHANCE. Final shut-down is Thursday,September 10th at 5pm EST.
Your trading competition has been signing-up for High Velocity Market Master in droves. Now’s the time to act, especially since I have no clue when they’ll offer this system again.
I’m definitely not trying to hard-sell you into this… but letting the opportunity to learn potentially p.r.o.f.i.t.a^ble techniques by proven pro’s pass you up is just not something I advocate. 
EDIT: HVMM IS SOLD OUT UNTIL FURTHER NOTICE!
Get in on the top-notch system and first-rate training now: http://www.atradingplan.com/order
Cash tight? No problem! Here is the link for the 3 simple payments: http://www.atradingplan.com/3easy
Hope to see you in the training!!
For those with a 9-5 EST type job, trading can be quite tough. Early morning sessions (London for example) are not in the cards. The U.S. open is usually travel time to work. This leaves the Asian session and Swing Trading as the only viable options. Even if you can trade from your work desk, successful trading requires focus.
The HVMM is a complete strategy that is not dependent on any particular trading session. Of course, you do want to stick with sessions that have some strong moves but you also have a life to work around. The video below covers the Asian session trading the GBPJPY starting at 7 p.m. est and ending at 10 p.m. est. One win, positive and done. How does 82 pips sound trading no more than 2 hours?
Don’t forget…you can grab the second HVMM webinar on Tues Sept 8 @ noon EST.: http://www.atradingplan.com/hvmmwebinar
Last night, while sitting up here in cottage country with a group of people, a barbecue, a few drinks and a lake about 20 feet away, the question “what do you do” comes up. Of course I mention trading. A few thought it was quite interesting and then Dave asked me about “signals”. Appears he is on a mailing list and has been introduced to the “fx signal services” that run rampant across the net (504k on a google search). He wanted to know my opinion on them considering it seems an easier way to trade. Here is what I told him…the best I can remember.
“In general….Stay away“!
Starting with the obvious, why in the world would you trust your decisions about money to someone you have never met? All you truly know about these people is what they tell you. Trading success is so much about psychology…what is theirs? Do they have a consistent plan they follow or simply use “gut feel”? Are they more motivated by making money or avoiding loss (HUGE difference in how they trade)? Have you seen audited proof of perfomance of their service? Are they registered with the NFA? What is the expectancy of their calls? Do they actually trade $$$ worth mentioning with their own calls? Some articles that promote these services state they are run by “forex trading experts”. I call B.S.
In the end, signal services violate one of the most important keys to success: Never add someone else’s opinion into your trading mix. That key comes from some of the most profitable and successful traders I have ever known or read about. I am talking traders who run $200 million dollar accounts! Traders who take the summer off to sail because they made a great deal of cash the rest of the year. Traders who trade a substantial $/point/pip
I am a “self-empowerment” kind of guy. Trusting my stake to some text message or others opinion is just not in my character. Learning to trade is not a difficult task:
1. Find a system that has a positive expectancy and suits you
2. Learn the system inside and out
3. Trade consistently sticking to the rules that make it a success
Learning to be successful takes more than that however. Psychology makes up a massive portion of whether you will succeed or not. Definitely a topic for a future post.
Like I said, “self-empowerment”. The Netpicks strategies are all about that. Stick to the system, get your trading psychology in check and there is zero reason why you should not succeed.
Check out the newest strategy: The HVMM.
Another webinar is set for Tuesday Sept 8/09 @ noon EST. Get all your questions answered and watch the strategy in action.
http://www.atradingplan.com/hvmmwebinar
Take responsibility for your future…your success. Be an independent trader.
P.S. Live trade rooms with actual performance results are a different ballgame. Check out: http://www.atradingplan.com/live-trade-rooms/
