In this week faq, we have a question from one of my blog readers asking me the below question
I am only trading demo accounts with 100000 dollar at the moment.
I was wondering if I can start to trade real account as I am now using 13 period moving averange and I have made 4 wins in a row although they are only small of wins 30, 45, 25 dollars.
First of all, I think that you are using a scalping strategy as your profits is pretty small. In order for me to better advice you, it will be best if you can tell me what is your risk reward ratio as this is one of the most important factor to successful trading.
If you have a lousy risk reward, you will still be losing money even when you have consecutive winning trades.
For example: In the past when I am a new traders like you guys, I remember taking a course from a marketers who pose as a trader.
For his strategies, he take profits at 10 pips but set the stop loss at 50 pips. For such a strategies, even when you can win 40 times in a row, you just need to lose 8 times to completely wipe out your previous profits.
40 wins x 10 pips = +400 pips
8 losses x 50 pips = -400 pips
Therefore you need to realize that the key to making profits in trading lies in risk reward ratio and not winning percentage.
Secondly, with just 4 wins, it is not enough to justify that your strategy really works. For me, I will always do a 6 months back test for a new strategy to make sure that it is profitable for the past 6 months and only move to live trading when I manage to have 2 consecutive months of profits on my demo using the strategy.
Lastly, if you wish to further improve your strategy, I will suggest that you try to formulate a pre trade setup and false alarm reduction techniques into your strategy. In order for a strategy to become complete, these are 2 things that must be incorporated into a strategy.
With the pre trade setup, it allows you to spot an incoming trading opportunity fast.
With the false alarm reduction technique, it will help you to reduce losing trades due to false alarm produce by your indicator which in the end improve your winning percentage.
These are the 2 things that I input into my strategies
I hope that I have answered your question and do feel free to email me if you have any question