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Once you have developed a system and back tested it for validation, then you can develop your conservative trading strategy.  You should be as conservative as possible, because you want make money, not gamble.

Your time frame, execution fees, and trade frequency will determine your minimum funding level.  FINRA (NASD) Rule 2520,  requires anyone who makes 4 or more day trades in a 5 day period to have a minimum brokerage account equity level of  $25,000.00.  The more trades you make, the higher your fees paid in commissions will be.  This must be accounted for in your trading plan.  For example, if you make 3 day trades per day and your execution fee is 10 dollars per trade, then you will have to make $1,200.00 per month just to break even.

Validation of your trading plan using simulations is one method of confirmation.  This can also establish a platform from which to tune your system for performance.  See the video below of one such simulation.

Ticker symbol GS (Goldman Sachs) 3 year 100k simulation.


Funding level, what happens when you are underfunded and you trade? see video...

Any system must include an entry condition, hold condition, and close condition.  A neutral signal or lack of direction from your system, is a clear indication to stay in cash or take a neutral position such as selling an iron condor with a wide body.  As stated above, it is possible to sell stock slightly higher than where you bought and still loose money.  This is due to execution fees, it is the price of doing business and must be included in you planning.

Entry point
Your entry point should be determined by the culmination of technical indicators, such as is represented by the meta indicator on the active stream 1 or active stream 2 page.  It should be determined not by what you "feel" is ok, but what you know to be an entry point that when executed on a regular basis will generate an overall net return (you will not make money on every trade).  This entry condition is determined with the use of back testing (as shown in the video above).

Exit point
Your exit point, just as your entry point, should be a condition comprised of multiple technical indicators.  The smaller your income target per trade, the more likely you are to have a repeatable return (this holds true with the exception of income targets so low that your profit is lost in your execution fees).  "Let your winners run and cut your losers" (author unknown).

Stop loss
You must always, always, always have a set price point at which you will close your position.  If you don't, your optimism might just get the best of  you and you'll keep your fingers crossed waiting for it to come back (with options [and even some stocks] this means a total loss).  If you don't cut your losing position and it is an uncovered short position, then you can even lose MORE than what you put up to place the trade.

System Development
Your system should be developed with the use of a paper trading account and the back testing of historical data.  Engaging in real trading before you have an established system which is tuned to your level of comfort may result in short term gains, but the most likely end result will be a significant loss.  You will face professional traders from day one, so evaluate your pre-trading efforts on the basis that your competition has not only college level training in the field, but many years experience.  So practice, practice, practice.  Keep a log of your mistakes, include how it happened and how to avoid it in the future.  The log should span through both your active trading and your practice trading.  It is good to remember that markets are constantly changing, so what works today, may not tomorrow.

Disclaimer: This site is for entertainment purposes only.  If you chose to use any information on this site to trade anything, you do so at your own risk.  All trading involves risk.

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