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One trader may have a lot of money, the other one has a little money to trade. One is risk-averse, as I am. The other one can take high risk without losing sleep. Murphy’s law is what can go wrong will go wrong.
The only question is when.
If you have lost money in the past, one of the reasons might be that you exactly did what the financial industry told you to do. But it is not your fault. How do you decide what you are going to trade? What is not probable might hurt you when it occurs and might have bad consequences.
Mistakes are unavoidable, but with a good statistics solution, you might be able to improve the quality of your decisions.
An algorithmic trading system will trade exactly according to your rules without any revenge trades. It will not get bored and it will not get tired. Backtest results are just a proof of concept. They are helpful to find out if something generally works.
I prefer to trade indicators like the bollinger bands with standard entry settings. My first profitable system worked with the bollinger bands entry. So probably this is the reason why. Maybe you should be the one who decides. Don’t you think? With an automated trading system you can do exactly that.
You probably wouldn’t try to change nature, and I wouldn’t try to trade a system that has no positive expectancy. I would have never traded the way I trade today because of my common sense assumptions. The only thing you have to do is to find out how to define and build the rules for your own customized trading system. For a microlot trade, I allocate at least $200 of capital. So with an account size of $1,000, I would only allow five open positions at the same time.
Our idea is to use simple automated trading solutions.
Discretionary trading is like a navigation system with a map that contains only a handful of streets. To get good results, you would need something with much more data. I can’t do everything I want to do. I need to pick my battles as my time is restricted. What would help you to become a successful trader? You need to use the two laws of successful trading to your advantage. So what are those laws and how can you use them? What if you have no trading money now? No problem.
If you could build a trading system that actually works for you, would you be able to come up with $300 if you wanted to? If you want to bake a cake with a recipe, you need to know the ingredients, the order of the steps to process the food, and the right temperature of the oven. And for trading you can create a recipe for your trading software. How do I adjust my position size? It depends on your capitalization.
Heuristics helped the humankind to survive. Heuristics work in most situations but are dangerous when it comes to trading because they are shortcuts in thinking.