1 is essential to trading, and even after a trader achieves good profitability, future uncertainty is always there.
The rest is irrelevant. We will take losses, we will be wrong, we will not get every move, we will return profits. Proof of edge is profit – loss = good positive number.
This is how trading works, it is stochastic, the outcome of any one trade, even short series of trades is highly random and beyond our control. It takes a lot of time and experience for this kind of thinking to take root, and moreover in my case it only happened when I had concrete evidence of an edge in practice.
Have you backtested this? How many times have you traded? Do you really know what you’re going to do has an edge in backtesting? Do you fully understand the edge and know your numbers?
Without it, you must have mental problems. the mind knows.
For some reason, I tend to overestimate my analysis as soon as the live trade starts the real bite, not the trade/paper trade. So you should test your rule without errors to make sure it works. And you have to do this yourself.
Have a clear plan – no ambiguity. Do not change this plan in the middle of testing. And the only way to know if a set of rules has dominance is to test it without error and see the numbers.
Reduce your capital and position size to the point where you don’t care (or minimize it). Now all that’s left is to run it. Don’t look at pnl, don’t worry about what happens, just focus on execution. A famous trader said that with only one lot he traded for over a year and finally got out of trouble in this way.
Only if you have more than a year of data, look at the numbers and see if you have an edge. It’s not enough for a year or even a day, but in general it should give you some measure. Multi-year backtesting + 1-year forward testing is much better.
If there is no edge, change the system. The advantage of backtesting is that imperfect but valid tests can be run more quickly. If there are no edges in the backtest, then there are definitely no edges. But the reverse is not true. Live trading is worse than backtesting, but at least it gives you proof that it can work.
Yes, you cannot rely on trading for salary-type income. Impossible, as long-term drawdowns can occur.
So you need a source of income or some kind of support system to pay your bills. Having a large capital also helps.
Don’t think of trading as a substitute for your salary, even after you’ve made a profit. It’s an investment alternative, and the best you can expect is an annual income, and that’s not guaranteed – the market is competitive and subject to change.
Good luck …