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Think of the pedals in your car where you can increase and decrease the speed to adjust the distance to the car in front of you. Christopher Columbus missed his destination by several thousand miles, and if his ships had been taken by a storm, nobody would even talk about him. If you find yourself in front of your screen hoping that a particular trade will become a profit, you probably have a lot of room for improvement. If you think it is a good idea to adjust your car speed to the traffic on the road, you might find out that it is also a good idea to do that in trading. A strategy test is when you compare results for a system set up.
For example, you could exchange the MACD entry signal with a bollinger band’s entry signal and trade the same historical data with all the other settings unmodified. Most people learn that you should keep your losses short and let your profits run. Have you heard that sentence before? It sounds like a reasonable concept. I have seen people trading insane lot sizes on very small accounts.
If they succeed, that can lead to big profits, but usually the account will be blown up sooner or later. You can see the quality indicator for the historical data at the end of the back test. Just click on the back test tab in MetaTrader and look at the history quality score. Is trading a good or bad thing? Most people are anywhere between the two possible extremes.
So here is what should be helpful to make a decision: When things get bad, that is the time when you need to decide if you trust the system, because a drawdown will always look like an unavoidable loss. Financial risk is something that makes all the difference. I usually recommend to start with a very low risk and increase it later, if everything works out.
Look at your past results and count how many losses you have caused yourself with your own stop loss. When something unpleasant happens, you are the one who will make something that you will consider to be of quick improvement.
How do traders feel when they lose money? I guess that they feel bad, but actually it will make you feel twice as bad losing money as a profit will make you feel good. While automated trading is a way to increase your chances of success, it is not a way to foresee the future. If you have a big base rate, it is possible to improve the quality of your assumptions and that can help you to improve your results and get above average probabilities.
Someday you will see the worst and most unlikely circumstances come together and you will fear a big loss. There are sometimes totally valid reasons not to do something. If you decide that you don’t want to do something, that is no problem. But it doesn’t mean that you couldn’t do it if you wanted. Today, with GPS and everything Christopher Columbus would probably be arrested by the Coast Guards because of his bad navigation skills.
A lot of people can’t do proper trading, and they all will be able to come up with a dozen excuses. Charts are drawn to represent numbers, and they do it on a relative, not on an absolute basis. If you look at a Metatrader chart, you will see that the price never reaches the upper or lower border of the chart. In 2015, a broker in the United Kingdom went broke, but not before he decided to increase the margin requirements to an insane level by purpose, which caused big losses for a lot of traders. How do traders become traders?
They just open an account and start to trade. They start to trade real money right away. There are those wonder kids who can play the piano when they are three years old. But for most of us, it takes time to become good at something.