In my recent blog post I’ve stated that first and the most important step in trading is to have trading system, which matches your personality when it comes to instrument which is traded, gearing, time frame, intraday or swing trading, etc.
Let’s imagine that you‘ve done everything possible to find data supplier; you have tested many systems over different time frames and thorough different market conditions. At the end, finally, you have found something that you like and as all is looking good, the question is: What’s next?
Of course, you must find broker which you need to use in order to trade instrument(s) you are willing to trade. For my liking, broker must have online trading platform; over the phone support in cases when platform or your Internet connection are not working, and, of course, the most important one – BROKER MUST BE REGULATED, ideally with your money staying in third party account, which is usually some of the big banks.
All in all, after you open your account you should deposit money and start trading. Yes?
This is where most of beginners make first mistake. After one has an account with broker which provides online trading platform; after trading system is in place, one should start to paper trade system in live conditions for, at least, 3-6 months, subject to time frame used, which shorter time frames (tick, 1min) asking for minimum of three months of paper trading, while longer time frame systems will ask for more practice time, if one assumes that longer time frame system is going to generate less trades per month than, let’s say, system used on 1min chart.
In addition to all mentioned one should start trading like real money is on the line - With journal in which all entries and exits are recorded live with: corresponding dates, time, profit or loss, weekly and monthly results and any other measurement that comes to one’s mind.
Simply, by paper trading, among other benefits I’ve mentioned above, you will get more chance to understand your system and your emotional reactions to it. Also, paper trading in live conditions will teach you DISCIPLINE which then you need to bring when money gets on line, as you will be in much better position to stick to the system, once you start trading it and when system hits some rough patches, that could be reversed before you know it.
Trade with trend.