When to start trading real money

[qlai]

@gaussian, I like your answers, but I am curious ... Let's say you have been given a task to listen to 100 elevator pitches and choose 10 most promising strategies. What would you need to hear? What would you ask? What would make you reject something immediately? You've got 10 seconds, go ...

 

[irisgandie]

If you are sure in your system of course you can start trading with real money but anyway you should be aware of mental biases and other sources of risk. I recommend to research more info about risk management (for example: https://capital.com/risk-management-definition). It can help you to save your money and nerves. More you know about risk management before trading with real money, less you lose after start.

 

[Pkay]

If you are using technical analysis to trade a linear product, with certainty, you can back test it. If it is still "too complex" then your strategy is most likely based on your instinct. Your instinct will change with experience and current mood. Start trading right now with a super small amount of capital, get your reps in.

Ps. Trading a 1 lot with real money is 100x better for your development than sim trading.

I take it that you are referring to one MICRO lot here and not a standard lot?

 

[Naturex]

it is obvious all of the defenders of automated trading on this site actually are clueless as to what it takes to trade with a good algo. you cannot trade with a PC from home and expect good results no matter what your math..period.

Stop projecting your own failure to everyone else and open your mind. Maybe you will realise that some traders DO make good money from trade systems and then perhaps you will learn to do it yourself. Profitable systems (with the right market) can have a HUGE edge over discretionary traders as it solely rely on data and not personal bias + It will take trades 24/7 across many markets, something that a discretionary trader can't. Some hedge funds to this day still implements Simple MA trade systems, and there is nothing advanced in a MA trade system, anyone could set one up with a little guidance.

 

[gentlerich]

When one knows that he/she is capable of understanding the market and its moves and patterns then you can move ahead without any obstructions. Once you open a live account,use your strategies in the smallest volume trades available. And the important thing is to treat your demo account as it is a real account. In fact many experienced traders still use demo accounts to try out new methods.

 

[marcela 2020]

The moment to operate with real money is when you feel sure of the strategy that you are going to handle, analyze everything well, for the moment it is better to manage the demo account so that you go practicing a little, although when you operate with real money there are things that change a lot

 

[daffyff]

Purely subjective.

When do you feel comfortable throwing all of your cash at it? You are going to get a lot of different answers. I will throw mine in as well:

1. What is your maximum exposure?
   
2. What is your risk-adjusted metric? (Sharpe, Calmar, etc)
3. What risk-adjusted metric number makes you feel comfortable? (Ex. Sharpe > 0.8)
4. What is your maximum drawdown, and why? Where do you lose the most?
5. Can you explain mathematically why you win when you win?
6. Have you walk-forward tested your system? How does your system do when trained for N days and traded for N+X days?
7. What is your risk of ruin?
8. Based on (7) what is your ideal capitalization?
9. Have you looked into the kelly criterion and determined your maximum leverage?

These are just a few things I use to evaluate a system. There are many more - for example 50 trades is a statistically significant sample for an approximately normally distributed variable (i.e. log returns) but wouldn't make me feel comfortable in terms of total performance. Fat tails make me more cautious which is why I look to ruin analysis.

I will unfortunately break the news to you that I think everyone else is ignoring. If you cannot program a strategy you are doomed to failure. You are removing the ability to walk-forward and monte-carlo test your system. You are removing all ability to do any sort of real analysis on your system performance over time. Since you cannot program the system pay someone who can. It could be as simple as an excel sheet or an R script. Pay them out of your investment capital. This investment will save you many, many thousands in the long run.

Hope this helps. There is no easy answer. You are going to get a lot of garbage responses. Especially in a forex forum. If you cannot mathematically explain your edge you have no edge. End of story.

EDIT: Sidenote: You can tell a post is worth ignoring based on the amount bold in it.

I cannot answer any of your questions But i will look all of those things up and get back to you.

I only just discovered backtesting, and i landed on profitspi for this. I understood intuitively that the last two years (as far back as my current subscription allows) is not a reliable indication of success. I'm going to go ahead and pat myself on the back for that, and yes I am absolutely seeking everyone's approval. I also figured on a way to "walk-forward" test it, but i didn't know that was what it was called. I will look into monte-carlo testing now.

to answer your questions, for now:
1. i don't know what this means yet
2 and 3. just looked this up, i will get back to you on it.
4. -25.5%, yes i know why and i find it acceptable.
5. yes, but in the way Dr. Malcolm explains chaos theory in Jurassic park...does that count? Or do you seriously want me to come up with a formula? Becaue that exceeds my capacity and laziness threshold, and i don't believe it would be worth the effort. Feel free to correct me if i'm wrong.
6. I'm halfway through figuring this out. I developed my strategy using three start days based on what i considered the worst time to get into the market (at a peak right before a drop), the best time (the bottom of that trough) and a neutral day (as far back as my backtester could go).
7. I'm glad i looked this up, and i will run the numbers to confirm this, but i want to say 0%. thank you for making me aware of it.
8. I want to see a 50% annual return if that is what you mean. I'm happy with a 5% outperformance of the s&p500.
9. nope, but i will put it on my todo list.

I have some questions now. Once i fully test the strategy out and iron out more of the wrinkles in it, how do i even implement it? I use TDameritrade, and just opened up thinkorswim today to try out the papermoney trading feature. Bottom line is, I won't be using TOS. I plan on doing the paper trading with excel now, but any suggestion is welcomed. I will look through the sponsors of this site, and a forum search in the meantime.

 

[themickey]

Stop projecting your own failure to everyone else and open your mind. Maybe you will realise that some traders DO make good money from trade systems and then perhaps you will learn to do it yourself. Profitable systems (with the right market) can have a HUGE edge over discretionary traders as it solely rely on data and not personal bias + It will take trades 24/7 across many markets, something that a discretionary trader can't. Some hedge funds to this day still implements Simple MA trade systems, and there is nothing advanced in a MA trade system, anyone could set one up with a little guidance.

I doubt a profitable fully automated trading system is achievable for a one man band retail trader.
If it were easy everyone would do it. There are gazillions of Chinese, Russian, Indian, European coders on this planet. Now if collectively 1 million people attempt it, will 90% be profitable? Maybe for the first week then they would begin to lose their edge. Nearly everything works part the time, then it doesn't.
The logistics of running fully automated, time, money, energy, enthusiasm, no distractions, no disasters, plus relying on 3rd parties for support on data and everything else.....
Trading is getting more difficult, not easier because the competition is building.

 

[schizo]

I doubt a profitable fully automated trading system is achievable for a one man band retail trader.
If it were easy everyone would do it. There are gazillions of Chinese, Russian, Indian, European coders on this planet. Now if collectively 1 million people attempt it, will 90% be profitable? Maybe for the first week then they would begin to lose their edge. Nearly everything works part the time, then it doesn't.
The logistics of running fully automated, time, money, energy, enthusiasm, no distractions, no disasters, plus relying on 3rd parties for support on data and everything else.....
Trading is getting more difficult, not easier because the competition is building.

He who knows will not speak. He who speaks doesn't know jack $hit.

―Modern Day Lao Tzu

 

[themickey]

He who knows will not speak. He who speaks doesn't know jack $hit.

―Modern Day Lao Tzu

True enough.
A computer is a machine while humans aren't.
Keeping multiple balls juggling in the air for any length of time is near impossible.