Hi. Have you ever wondered what it takes to do really well in trading or what necessary steps you need to do? I keep receiving these questions quite often. So let me give you my five proven steps. I’ve been doing really well with them in my own trading, so I believe they can help you too.
Step #1: Questions
You may or may not like it, but successful trading is about the ability to come up with new, fresh ideas. Fortunately, it’s not as difficult as it sounds. All you need to do is to keep asking this question: “What happens if… ?” What happens if I buy when the RSI indicator is overbought instead of oversold? What happens if I start moving my stop-loss according to my moving average? By asking the “What happens if… ?” question constantly, you start to move forward really fast and I can guarantee you some of your ideas will be sooner or later really big winners.
Step #2: Robustness testing
Most strategies are crap. That’s the fact. But how do you know which ones aren’t? You can always find it out through extensive robustness testing. What does it mean? In my case it mainly means three things: A) A good strategy can easily adjust to changing market conditions. An extensive walk-forward testing is needed at this stage. B) A good strategy performs reasonably well in other markets. C) A good strategy has been developed only on a part of all your historical data and performs well on the rest. To be very honest with you, about 95% of all my strategies never pass my robustness testing criteria, but when they do, it’s time to move to the next step.
Step #3: Portfolio
One strategy will help you learn, but a portfolio of strategies will help you grow. You don’t need to have a big portfolio at the beginning, but even three strategies are much better than just a single one. Remember, if you want a smooth equity and a steady income from your trading as soon as possible, the only way is through diversification and portfolio. Very few people are aware of this and even fewer spend significant time by modeling different portfolios. I personally spend a lot of time trying to find out the best way to combine my strategies together to make a really good portfolio.
Step #4: Position sizing
Let me ask you a question: Do you want to make it big or do you want to stay small? Because if you want to make it really big, then you need to start seriously thinking about position sizing. This topic can be pretty complex, but it can be also extremely rewarding. So, where do you start? I highly suggest reading Van Tharp’s book “The Definitive Guide to Position Sizing.” You will learn a lot. Personally, it has moved my trading to a whole new level.
Step #5: Persistence
Listen, it can be done. It doesn’t matter what education you have, how old you are, or even how confident you feel at this moment. I’ve seen many people succeed. I’ve seen traders making it from zero to quite a nice living, and that’s why I believe that you can do it too. Yes, it does take some time, effort and learning, but once you’re finally there, it’s all worth it. So, stay persistent and mainly never give up, and that’s really all.