May 21, 2021
Building Confidence with your Trading
Have you ever fallen into a pit of despair and lost all confidence in your trading ability?
Well, you’re not alone.
This is something that plagues the majority of traders at some point in their career, for a variety of reasons.
Are you at a point in your trading where you feel like you're ready to go live? Do you feel like something is missing, which is reducing your confidence?
If the answer is yes, keep on reading because this article is for you! Here are some tips you can use to get your confidence back on track.
Have A Written Trading System
Most traders have some kind of system they are using for their trading. That doesn’t necessarily mean they are all logical and being used in a consistent way, but there is at least some sort of system.
If you google the definition of a system, it’s going to tell you:
If you’re near the stage where you're thinking about switching to a live trading account with real money, you really should have a consistent approach to your trading. You probably do to a certain degree, but based on my experience of working with many traders over the years, it's likely to be mostly in your head rather than being written down in a logical fashion.
You do need to understand your system in your head, but it's much more difficult to keep yourself accountable and check your past trades against your system if you don't have the steps written down in the first place.
By making sure your trading system is written down, you can be confident that each decision you make is consistent, even if you’re not yet profitable.
The written version of your system should be as detailed as you can make it, including the what, the why and the parameters for each step.
Once you have your written system, you can then move onto the second step.
Practice, Practice and Even More Practice.
Before you unload your life savings into a trading account, you need to thoroughly test your system.
Not just back-testing over a few weekends, no no no!
You need to test it over hundreds and hundreds of trades. That way you can build experience of trading in a wide range of situations and really put those decisions in your system through their paces.
Ideally this will be in a live market, using paper trading or a demo account. But there are alternatives available, such as a simulation trading account that can replicate a live market using historical data.
Back-testing can also be used, but for many traders it can be difficult not to be biased if you accidentally reveal the outcome of the trade.
In addition to building experience in different market situations, you will also have a large sample size of trades, giving you more confidence in the results you are seeing and in your performance.
Trading Data Tracking
That last point brings us onto the next important tip.
Data is hard evidence to show you if you're profitable or not. Not only that, but if your system isn’t profitable, you can see where improvements need to be made.
To start tracking your trading data, begin by thinking about the questions you would ask that you would like the data to provide an answer to. This will help you figure out exactly what data you need to collect in order to answer these questions and begin making improvements.
There’s nothing that will build your confidence in your trading like having a proven track record.
Doing these three things will help prepare you for trading in a live market with more confidence. You can go in with the peace of mind that your system works and you can shake off the element of doubt each time you open a trade.
The time it takes to complete these three stages will differ depending on what stage you are at with your trading. But if you feel like you're ready, then just get started and, of course, if you need help you can reach out to one of our mentors in our Members' Community.