A comprehensive roadmap to creating a trading system for living.

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Which stage are you in this process? 1, 2, 3, 4, or 5?

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1. Search & Research

This marks the initial stage for newcomers.

When entering the market for the first time, your primary objective should not be the pursuit of immediate profits; instead, it should be to acquire a comprehensive understanding of the market and identify a trading method that aligns with your preferences.

Find yourself a trading method that you feel is suitable to focus on researching that method. That is in-depth research, only then will you become an expert in that method.

During this stage, you'll need to engage in extensive searching and research to construct a basic trading system.

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2. Backtesting the trading method

Once you have developed a basic trading system with a clear checklist, it's essential not to immediately engage in real-money trading.

The subsequent stage involves testing your trading method using historical data. The recommended backtest data period for you to have confidence in your system is 2 years.

If the backtest results fail to meet your expectations, it's advisable to revert to the 1st phase, where you can continue refining and researching your trading method until you achieve favorable results within the two-year backtesting window.

Crucially, during the backtesting process, you must factor in commissions to closely simulate real trading conditions. If the backtest aligns with your anticipated goals and yields positive results, you can confidently proceed to the 3rd phase.

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3. Demo trading

In the 3rd phase, you will engage in real trading, but with the use of a Demo account.

The primary objective during this stage is to put your trading method to the test in the actual market environment.

Since this phase is essentially a trial, it's imperative to use a Demo account to mitigate the risk of financial losses. We introduce real funds at a later point in the process.

These interactions with the live market will enable you to uncover hidden limitations that may not have been evident during the backtesting of your trading method on historical data. Such limitations might include issues like slippage, high spreads, or unexpected news events.

As you transition into real trading at this stage, it becomes crucial to diligently implement proper capital management strategies for each of your transactions.

The duration for Demo trading spans 3 months. When this period concludes and your Demo trading results fall short of your expected targets, it's essential to address two key questions:

What: What are the root causes of this ineffectiveness?
How: How to overcome the identified issues?

If the problem arises from actual market conditions, it's advisable to adapt your approach to better align with the market dynamics and commence Demo trading anew from the beginning.

However, if the problem stems from limitations within your trading method, the recommended course of action is to revisit the 1st and 2nd stages, where you can continue your research and adjustments to refine your trading method for improved performance.

Now, what if your 3-month Demo trading results do meet your expectations?

Congratulations! This signifies an initial achievement following significant investment and patience. At this juncture, you haven't incurred any losses in the market but have managed to generate favorable results. You are now prepared to advance to the 4th stage.

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4. Real trading 1

As you transition into the 4th phase, you are still within the realm of method testing, but now at a more advanced level involving actual trading with a small account, often referred to as a "Small live account."

We recommend that you only use 1-3% of your funds for this type of account.

During this period, it's important to recognize that your effectiveness in trading may not be optimal, and there's a possibility of incurring losses. However, these potential losses will be limited because you are operating with a small account.

This phase serves as a crucial platform for developing and honing your trading psychology, an aspect of trading that holds immense significance. The recommended duration for implementing this phase is 3 months.

If, at the end of this three-month period, your results fail to meet your expectations, it's advisable to reevaluate all relevant factors, including your trading psychology. At this point, you may need to either return to phase 3 or consider restarting phase 4.

However, if you do achieve the expected results after this three-month period, it signifies a pivotal moment in your trading journey. You can confidently proceed to the next phase, which is phase 5.

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5. Real trading 2

At this stage, you have accomplished the following milestones:

Created a personal trading method.
Implemented sound capital management practices.
Enhanced your trading psychology.

In phase 5, you transition to actual trading with a larger Real account, aiming to achieve your target profits. At this stage you should only use about 5% of the capital you have.

This phase spans a 3-month period, which serves as a crucial checkpoint designed to safeguard your capital in case your trading endeavors prove unsuccessful.

During this time frame, you will closely analyze the root causes of any ineffectiveness you encounter, enabling you to identify the appropriate stage to revisit and potentially start anew.

Since this stage involves trading with larger sums of money, it provides you with an excellent opportunity to further refine and practice your trading psychology, ensuring a more thorough understanding of this vital aspect of trading.

If you successfully navigate these critical three months and achieve the results you anticipated, congratulations—you already had a trading-for-a-living system.