ODJ wrote: Mon Aug 05, 2024 9:26 pm
Two factors are at play when it comes to success and long-term profitability in trading.
1) The trading tools used
2) The Trader's experience
When it comes to testing, I'm not a big fan of tools such as the Strategy Tester in Metatrader. And the reason is simple.
It doesn't take into account the two factors highlighted above...and also doesn't take into account, Human Emotions (fear & greed)
Almost always, majority of the trades taken by the strategy tester will NEVER be taken by the Trader.
Trades such as high volatility News trading (when high impact news are released)....are generally avoided by most Traders, until the Market settles.
Also, the Strategy Tester scans historical datasets and trades 24hrs a Day....even during the time when the Trader is asleep.
Hence why the test results are grossly inaccurate and unreliable.
No human being trades that way! Except if you plan to use a ROBOT.
Hence why majority of my testing have been on LIVE accounts.
In my years of trading, I have discovered that trading lower timeframes is highly stressful and unprofitable in the long run.
Not many Traders can boast of being profitable month after month or year after year.
Try checking your trading records after every month\year....for the number of years you've been trading, AND you'll see what I'm saying.
For consistent PROFITABILITY in the long run, HIGHER timeframe is the way to go.
That's how the big boys make money!
You make a valid point regarding the limitations of strategy testers and demo accounts. Real trading emotions like fear and greed simply aren't replicated in simulations, which can lead to overly optimistic outcomes in tests that don't always translate to live markets.
Additionally, the endless "funding" of demo accounts removes the psychological pressures found in real trading environments, affecting decision-making and risk management skills.
I would also recommend starting with a live trading account using actual funds is more beneficial. It introduces real emotional dynamics and consequences into the trading process, making the experience more real and educational.
Concerning risk management, I would again recommend using only 10% of available funds per live account as It builds in a buffer to absorb early losses, which are often inevitable due to the initial lack of experience, ones emotional responses, and the steep learning curve in live trading conditions.
The process of initially losing a few accounts, while not ideal, is a reality for many traders. Each lost account can be a powerful lesson in risk control, emotional discipline, and trading strategy refinement. After experiencing these setbacks, traders often begin to develop a more realistic and sustainable trading plan. Continual practice and ongoing learning are crucial as they solidify a trader's approach and enhance their decision-making framework, eventually leading to a more comprehensive and effective trading strategy.
In the initial years of trading, it is crucial to dedicate time to acquiring as much knowledge as possible. Participating in trading forums like Forex Station is highly beneficial, as these platforms allow you to learn from the experiences of other traders. Observing the challenges and mistakes encountered by peers can provide valuable insights, helping you steer clear of similar pitfalls. By engaging with the community and leveraging collective wisdom, you can expedite your learning curve and enhance your trading strategies more effectively.
For long-term, consistent profitability, trading on higher timeframes is often more effective. This approach is commonly used by professional traders to capture significant market movements and maintain a stable profit trajectory. Recently, there has been a noticeable shift in retail trading dynamics; where previously over 94% of retail traders faced losses, improved strategies and enhanced market knowledge have reduced this figure to around 60%. Increasingly, traders are successfully capitalizing on shorter timeframes like 15 minutes, 5 minutes, and even the fast-paced 1-minute cycles, securing more pips and refining their trading techniques. This adaptation highlights a growing proficiency among traders in managing the complexities of various market conditions.
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