Things that Ruin a Trading System

10 Things that Ruin a Trading System

If you find a good trading system, you may not know that even if you make some important mistakes, you can still make the system lose money. Once you have a system that seems to be strong based on previous data, stock charts, or back testing, be careful not to make these mistakes:

  1. In the long run, big losses make winning systems lose.
  2. Take a break when things get bad. As with any system, there are going to be times when the system doesn’t work out. The key is to manage risk and stick to your plan until your system has time and the market is more favorable to your method.
  3. A lack of discipline, such as straying from taking defined entry and exit signals to your own ideas, is dangerous.
  4. If you trade too big, your system can’t handle huge positions sizes that make your first string of losses your last string of losses.
  5. Style drift is bad, and changing your trading system while you’re still in the middle of a trade isn’t good. Before making changes, research has to be done after hours when the market is closed and the changes have been tried out.
  6. A lot of confidence comes from doing research, running tests, and doing homework. You have to believe that your method will work for a long time.
  7. Don’t trade someone else’s system for your own. Instead, build your own and use it. Use the principles that you believe in and work to make things that fit who you are.
  8. Trading too big when you’re going through a bad run of bad trades is bad for your chances of winning. Instead, try to stop the bleeding by trading smaller and smaller until a new winning streak comes along.
  9. Make one big, bold, can’t-miss trade and lose all your money. Don’t let your desire for money make you do something bad. Stick to your plan.
  10. Working hard for a long time leads to money. Don’t quit quickly.

Discipline, consistency, and hard work pay off in the long run. Avoid Things that Ruin a Trading System.


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