*Why I believe the best traders are those that create and refine their own strategies*
It’s nice to be back and blogging after a quick holiday. I am a huge believer in the benefits of taking time away from the charts, clearing your natural market bias’ and simply unwinding. It is very common for traders to get locked in to the markets and their current beliefs and lose control of their psychology if they spend to much time in-front of the charts trading. Get out of the office, put your phone down and go an enjoy yourself.
I am going to start this week with an educational blog post and talk to you about why I think developing and refining your own trading strategies is much better then buying courses, following mentors or even worse… buying “trade signals”.
Before I start, this blog post isn’t there to bash/talk bad about any trading courses or other traders that do sell courses because I know there are some very talented traders out there that do do this. However, as a whole, the majority of the retail trading industry is full of completely rubbish educational courses and this is because financial education is wholly unregulated.
For this reason, I recommend that everyone takes the time to develop their own strategies and only that way will you know how it works, when it works and what to expect from it.
FAQ: I am often asked if I have paid for any trading education courses and the answer is no. Other than purchasing books to read, I have developed my own strategies from scratch.
The issue with paying for other peoples strategies is that we are all different. What works for one person may not work for another and this is even more applicable when trading the financial markets because of the large number of variables involved.
Technical analysis tools, technical indicators, trading timeframes and the large number of financial instruments and products available to trade are all part of the criteria that makes up a successful trading strategy and it is very hard to simply copy this from someone else.
I know for a fact that one of the most important parts of my main trading strategy is to be able to spot the prevailing trend on multiple timeframes and use it to adjust my expectancy and risk. This is not something you can simply copy from me and is something that only practice and experience will give you.
So what is the process of developing your own trading strategies and learning to trade on your own? Let me break it down in to some simple steps for you.
- Read, watch and digest as much information as possible. Every day is a school day!
- Create your first strategy. Start with the basics of what instruments you want to trade, timescales and analysis techniques.
- Start watching the markets and get involved with a demo/practice account. Find your trade entries, and place your intended stop losses and profit targets.
- Review your trades. This is very important when you are first starting out and you should aim to record as much information as possible about each trade. This will help you with the next step.
- Don’t get caught out focusing on super accurate, high reward:risk ratio trades. Instead, get your basic strategy built and try to get your win rate % to a suitable level.
- Get profitable. Use your strategy and conservative stop losses and profit targets to get to a stage where you are profitable. If you cannot do this then your strategy is not correct and you need to go back to steps 1, 2 and 3.
Important Note: When you first start creating and practicing with your strategy, you will not have the experience or data to optimise it and get super accurate entries. Refining and improving strategies takes time and practice and lessons must be learnt from both winning and losing trades.
7. Refine your strategy. The markets are forever changing and you will need to constantly monitor your strategy results across multiple years and difference types of market environments. This is very important because the financial markets move in cycles – months, years and decades can all act differently.
8. Move to live funds and continue your path to becoming a full time trader (if that is your end goal). This should only happen once you are successfully profitable over the long term and you have the data from your strategy to back this up.
An important point to note is that there is a huge difference between trading demo funds (fake money) and trading a live account (your hard earned capital). When you make the switch to trading live funds you will have a whole new list of psychological problems to master and overcome.
Trading psychology is such a major topic that it deserves its own dedicated blog post but remember this… proper trader psychology can be established over time and almost totally relies on your confidence in your trading strategy.
TOP TIP: It is hugely important to have absolute confidence in yourself and the strategies you are using to trade. Only time IN the markets will give you this and creating your own strategy will help give you confidence in it.