How to Optimize Your Trading Strategy - Introduction
How has top Silicon Valley companies like Apple, Amazon, Google, and Facebook achieved so much scale at the world stage? How have they managed to reach valuations of $500 billion and above? The answer is in their strategies. These companies have the best strategies to dominate the world. For example, Facebook has achieved a global scale by offering its products free of charge while Apple offers its products to a loyal user base for a premium. Apple has invested in quality and loyalty.
Let me bring this close. How has Warren Buffet managed to achieve success for more than five decades? The answer is that Buffet has mastered his strategy of value investing. He has avoided investing in companies he doesn’t understand. In the dot com bubble, he had the capital to invest in the new dot com companies. He had an opportunity to make a fortune, but, he avoided to do that because those companies did not meet his value investing criteria.
As a trader, it is very important to have a good trading strategy. A strategy that has been tested and backtested using historical data. By having such a strategy, you are able to navigate complex and volatile markets without having any worry. Remember, there is no trading system that is 100% perfect. Optimizing your system will help get your system close to that.
First, you need to backtest your strategy. This is where many new traders go wrong. They create a strategy, test it in their demo account for a few days, and when it works, they believe that they have a good strategy. In many cases, when this is done, it is usually the start of the end for the trader.
Truth is, any trading strategy needs to be backtested using long-term data. This is data that has existed for a long time. Fortunately, this data is freely available in most trading platforms for free. Using historical data will help you see how your strategy would have performed in the long-term.
Secondly, you need to regularly add or remove parameters from your strategy. Even when you have backtested the data, the fact is that conditions will change in future. Therefore, you should always analyze the strategy and make changes when necessary. Doing this will help you remain active and improve your trading strategy.
Third, to optimize your trading strategy, I recommend that you don’t develop your strategy alone. I recommend that you work as a team to create and test the strategy. When you work as a team, you will be at a good position to find opportunities and vulnerabilities in your system.
Fourth, I recommend that even when you have a good trading strategy, you take time to learn. You should not just sit there and wait for the strategy to work out well. As a trader, you should always work to expand your knowledge about your trading strategy. You can do this by watching videos, reading books and engaging with fellow traders. By doing this, will help you expand your knowledge and experience on trading. It will empower you to become a better trader and learn new tricks to improve your trading strategy.
As I mentioned, no trading strategy is ever perfect. Your role as a trader is to work hard to optimize your trading strategy to make it better every day. Doing this will ensure that your strategy continues to be better.