Steps a trader should carry out before putting a new discretion system into action

Hi!

What action do you take when you want to trade new discretion system live?
How long do you backtest it?
How big is historical data?
How long do you test it with demo account?
When you start live trading, do you risk less than normally?
What else do you do before trading live with new system?
I realize that it depends on the system itself and a trader’s experience.

Thanks for your help

woju2

Hi

I don't think any discretionary strategy can accurately be backtested. There is always a "momentum" component that just can't be reproduced by historical data.

I am a discretionary daytrader myself and whenever I miss some trading opportunities - due to holiday, sickness, errands, personal matters, etc - I rarely go over the charts and pick "what-would-have-been" trades.

I only review the charts to identify the crucial levels where the action occurred, but I never do "hindsight" trading because I wasn't there when those intervals were being printed.

If you have been watching live markets for long enough, you'll surely understand how different steady charts are as opposed to live charts.

My personal preference for a discretionary method is to have a rule-based component - fixed component - and a discretionary component - flexible component -

I like to identify my setups by using a rule-based component. However, my discretion comes in in terms of whether I should be more or less aggressive with my entry as well as with my trade management.

Basically, I want to be as less discretionary as possible to spot opportunities but as flexible as possible to manage my trade.

This is why I recommend you develop a rule-based strategy from entry to exit and make sure it provides you with a real edge.

Once you have that, you can start demoing it and little by little, add your discretionary component.

If you are a beginner, try to be as little discretionary as possible when you start because the emotional part can play against you.

You need to develop good discipline first and prove to yourself that you can respect a clear simple plan. You need to learn how to lose and take losses. You need to learn how to run your winners as well.

All that will help you develop a "feeling" for price action. Only then will you be able to incorporate your discretion into your strategy.

It takes time and patience and many traders won't ever develop that "feeling" because they simply can't detach themselves from their emotions.

Bear in mind that the more trades you take, the more you practice and the more experience you acquire. All that will help you develop experience and a "feeling" for the market.

Last but not least, in order to be a successful discretionary trader you must be willing to embrace accountability for all of your trades.

There is no system to blame when you take a loss. It's all on yourself and you must learn how to deal with that.

Basically, it's the same as an airplane pilot turning off the cruise control and taking over the cockpit. If the airplane crashes, he's the only one to blame.

IS

Here is some advice from the james16 chart thread. He has posted these steps 2 or 3 times in the thread, and I believe they are very valuable to anyone beginning to trade, ESPECIALLY a discretionary system

http://www.forexfactory.com/showpost...postcount=1415


tyler

Discretion is what makes or breaks a trader. You can't be 100% mechanical and expect to make pips week in week out. Market conditions are constantly changing.

Thanks for your answear

When you test your system with demo, do you have any rules? For example, you have to try 50 trades, or double your demo account before trading live.
In my opinion discretion is a bit tricky because it allows you to change your rules. When you know when your system/rules are ready and there is no need to adjust it?
If you want to change your rules, when you know there is a need to do it. It may be a temptation to trade more and due to that fact it quite easy to change your rules.


Woju2