- First you stop trading until you do some homework and learn what leads to profitability in the financial markets.
- Once you start to understand what makes traders money then you begin to build a trading system that fits your personality and is profitable over the long term.
- You have to test your system across historical price action to see its win-rate, drawdowns, and risk of ruin during years like 1987 and 2008.
- You then have to take your theoretical trading system and convert it to an actionable trading plan that had be executed in real time with real money.
- Your money management has to be right with your position sizing and stop losses to eliminate the risk of ruin during a losing streak.
- You must develop the discipline to take your entry and exit signals regardless of how you feel about the market price action.
- You have to be able to mentally handle losing streaks and losing money.
- You can not try to curve fit your system as you go through the current market price action.
- Winning streaks should not make you arrogant and losing streaks should not make you depressed. Your goal is following your system, you can not control the market price action.
- Trade in a way that you will keep your capital safe and grow it. Don’t trade overly aggressively in the hopes of getting rich quick. Get rich slow through proper trading and avoid going broke quick through excessive risk in the hopes of big gains.