Follow these ten most important rules to become a successful system trader:
✓ To be a long-term successful trader, you should be okay being a short-term loser. Learn to accept the losses.
✓ You can’t be a winner always. Instead of fighting against drawdown, make peace with it, learn to live with it.
✓ Always remember that every trading outcome is random in nature. Most traders at times think “I faced three continuous winning trades, fourth can be a losing trade and hence I am not taking the fourth trade.” No, don’t do that. You can never be sure about the outcome of your next trade.
✓ Never override your trading system. The trading system always wins in the longer run. Let it do its job, do not interfere with it.
✓ There are traders on Twitter who always make profit without any drawdowns. Don’t fool yourself. It’s better to un-follow such handles.
✓ Failures and setbacks are part of life; we are able to live with it, and we know only when we deal with such setbacks that we can come up in life. Similarly, drawdowns are inevitable; it is only when you learn to handle them and deal with them that you can hit the new equity high.
✓ Always doubt your trading system before implementing it not after going live. If a trading system is with small or insignificant drawdowns it is more likely a result of chance, randomness or curve fitting.
✓ Always trade small when you start trading a system. Get used to its daily fluctuations and gradually increase your stake in it.
✓ No matter how high the returns look like, don’t fall for it. Always check how much risk you need to take in order to achieve those returns. If the returns to drawdown ratio is very small, you can avoid it or reduce the leverage and trade it.
✓ Above all, always assume that your biggest drawdown is always in the future. So take a smaller risk with each trade if you want to strive in this business for the long term.
