Now we get to the finishing steps.  We will verify our testing in a demo account and I will give you some tips on finally going live on a real money account.

Forward Testing

Start your testing

Now it is time to open a demo account and continue testing your strategy in live market conditions, still without risking any real money.  Most Forex brokers offer a demo account, so you can learn how to use them.  Open a demo account with the broker that you will eventually trade live with.

To help your research, here are some things to look out for and who I trade with.   You may have different reasons than me for choosing one broker over another, so I’ll leave the decision up to you.  Basically, you want a broker that has:

• Excellent execution (your trade gets processed fast)
• Reliable and easy to use trading platform
• Small spreads
• Quality company with a lot of cash reserves (do your research!)

You are probably wondering why we need to keep testing, when we already did all that work backtesting.  Well, as awesome as backtesting is, it still has some shortcomings…

• Since you can take trades at any time of day in backtesting, that might not fit in with your real life schedule.  You might have to pick up the kids at some of the best trading times for your strategy.  Forward testing will show you any time-of-day weaknesses.
• The broker you choose may have a platform that is much different from the backtesting software you are using.  Use a demo account to give it a test run.  You don’t want to be figuring out how to place a stop loss when real money is on the line.
• There is a small chance that the pair you tested may have changed fundamentally over that past few months.  Not likely, but if your demo trading is much worse that your worst case scenario in backtesting, you may want to hold off from going live.
• Your broker might have some rules that you didn’t account for in testing.  For example, some brokers limit the number of currency pairs you can trade in a mini account.

Best to figure out these things now, instead of after you have funded your account.  In my opinion, you should Forward Test for at least 3 months (profitably, of course) before ever considering going live.  If you are still unsure, test for longer.

When it is time to go live?

This is where you have to step over this line yourself.  I cannot tell you when it the right time.  Like I say in my disclosure, I’m not here to tell you what to do with your money.

However, if you have seriously gone through this entire process, I think you will know when you are ready.  Even if you have doubts, some brokers like Oanda allow you to start with no account minimum and trade nano lots.

What are Nano lots? Nano lots are awesome!

They allow you to trade as little as 1 currency unit as opposed to the mini accounts at other brokers.  The mini accounts usually have a minimum of 1,000 currency units per lot.

Nanos allow you to get into almost any trade with a $100 account and only risk 1% per trade.  It will really give you good practice with a small amount of money.

You should start small

Even if you have been killing it in testing, when you start trading with real money (no matter how small), the psychology can be very different.  So, starting with a hundred bucks will give you that experience without risking your wad.   You can always deposit more later.

The process I outlined in these three lessons do the best job of preparing you for real money trading, but there is nothing like the real thing.

Hope this helped, if you want more detailed information on how to build a trading strategy, get my free Strategy Development Course.

Thanks for reading this series

Take advantage of the group approach to backtesting

If you liked this series, consider joining The Currency Alliance.

This is your opportunity to get in on the ground floor, save a ton of money and get access to a wealth of testing results.  Click here for more information and instructions on how to join.  It is only for people who are willing to work, but I believe that it can become a huge resource for figuring out what works and what doesn’t.  Think of it as crowdsourced strategy testing testing.

This offer will end soon, so if you are interested, act soon because I will take the page down when all the spots are filled.

Disclosure: I trade live with Oanda, but do not get any compensation for mentioning them.  I just think that they are a great broker. 

###

P.S. – If you have 10 seconds to answer 3 simple questions, it would be very grateful if I could get your anonymous opinion on a few things.  This will help me deliver more information on this blog that will help you become a better trader.  Thank you very much if you already answered the questions.  Click here to help me out.  Cheers!

Photos (in order of appearance):  Horia Varlan,  skyfaller

Here is what you should to next:

Test it until it is obvious…

Become the Mad Scientist of Forex

Now that you have learned a strategy (or invented one), it is now time to test it.  This is where people usually get tripped out.  Remember that little thing called work that I was talking about before?

Whoomp, here it is.

But this is what separates the tadpoles from the frogs.  A lot of people want to be rockstars (literally), but how many of them want to do what is necessary to become a professional musician?  Very, very few.

If you have got this far in this post, you are probably willing to put in the time and effort to make it happen.

Even so, this may seem a little intimidating, so stick around to the end of this post to learn how to join a community that will help you do this for free…

So what do you need?

Forex backtesting software.

There are a few different ones out there, so take a few minutes and see which one is right for you.  I personally use Forex Tester, but there are other solutions like Ninja Trader and Tradestation.  Some brokers even provide ways to backtest, so look around.

It will probably cost some money, so be prepared.  But seriously, how much money is that compared to a college education, or even a couple of continuing education classes?  It is really affordable.

Also, make sure that you can cheaply get data from at least 10 years back, so you can get a good feel for if a trading strategy will work or not.

Why do you need to do this?  Here is a video that illustrates exactly why…

If you don’t know where to begin, check out my free Strategy Development Course.  It will give you a step-by-step on what to do and is more detailed then I could ever get in this series.

Once you have your chosen backtesting weapon (software), do the following:

• Write down your trading strategy in a notebook or in an online journal.  Specifically write down:
• What pair you are testing (pick only one)
• What time frame you are trading on
• When you will enter
• Profit target
• When you will exit
• If you will scale in/out or take an all in/all out strategy.
• How much of your account you will risk per trade (should be less than 2%)
• Any risk to reward ratio requirements
• Anything else you can think of that might pertain…
• Then, test that exact strategy for as long a period as you can
• WARNING: There will be a big temptation to start experimenting with settings in the middle of the test.  Don’t do it!  Stick with it until you run out of data or it is obvious that the strategy will not work…whichever comes first.

After that, figure out how you can improve the return (if possible).  Maybe you can:

• Tighten the stop loss
• Take fewer trades
• Pay better attention to support/resistance levels
• Eliminate some indicators
• Look for a bigger profit target
• Etc

You should test at least 1,000 trades under your belt before moving on to the next step. 

Test the same pair again, if you have to.  I tested 1,000+ trades, some of which I shared here.  Once you are satisfied with the results of a strategy, it is time for…forward testing (that is the topic next week).

Here is how you can crush this step…

Doin' it "Office Space" style

Yes, the back testing step is the hardest.

But what if you could join a friendly community of traders dedicated to testing and helping each other out?  Check out this page to join my new community for free and be a Pioneer Member.

You will get free lifetime membership for helping me get this started.  When I officially launch the community, it will cost $20 per month and prices will increase over time.

Click here for more information and instructions on how to join.  This offer will end soon, so if you are interested, act soon because I will take the page down when all the spots are filled.

See you on Wednesday! 

###

P.S. – If you have 5 seconds and are looking for a forex signal service, I just have one question to ask you.  Thanks in advance!

Photos (in order of appearance): pasukaru76, keystricken, thumbnail by: Midtown Crossing At Turner Park

This series will outline what I believe is the best way to go from learning a trading strategy (or having a strategy idea), to thoroughly testing it, to finally being have the confidence to take it live.  Just to clarify, we are going to be testing discretionary (manual) strategies, not automated ones (EAs, robots, trading programs).

Will this guarantee your success?  Of course not.  This does take work and like I say in my disclosure, most people will not be willing to put in the time and effort.

But you are not one of those people right?

No, not one of these guys

Even if you do put in the time, you may not be successful right away.  What this process does do, is it greatly shifts the odds in your favor, without risking a dime…and that is all you can ask for.

As Professional Trader and Fund Manager Chris Lori mentioned when I interviewed him, tirelessly backtesting strategies was the biggest factor in his success.

My friend Haji took his laptop with him on his 6 month assignments at sea, when he worked on a LNG tanker ship.  During that time, he tested the crap out of some trading strategies and as a result, he was able to quit that job to trade full-time and spend more time with his family.

Again, these are not typical results, but the best way to learn something is to model people who are successful at what you want to do.  With that, here we go…

Get a strategy to test (there are two ways to go about this)

You can either invent a strategy yourself, or learn it from someone else.  If you are not consistently profitable already, then you should probably stick to learning from others.

But there is a catch.  You have to learn from people who are doing it for a living.

Remember, are they putting food on the table with their trading?

There is a lot of quality free education out there, but eventually, you will probably have to put out a little money (doesn’t have to be a lot) to get a quality education.  This is an important thing to keep in mind.

It is easy to get caught up all the different strategies that are posted on the forums, but remember that you best shot at success is start with a strategy that is already putting food on someone else’s table.  Find these people and learn as much as you can from them.

For example, the method that I am trading now came from a $10 ebook on Amazon.

However, if you do feel the need to get creative, the next part of this three part series will allow you to indulge your craziness without losing any money.

If you liked this information, feel free to Share it by clicking one of the buttons on the left side of this page.

Stay tuned on Monday for the next installment of this series.

Here is a special thanks for reading…

I truly believe in this process I will launching a community dedicated to crushing the hardest step in this process (you will find out what that is on Monday).  If you want to get a jump start, check out this page to join the community for free and be a Pioneer Member.

Yeah, that is a fancy name for Tester…but it sounds better.  Seriously though, you will get free lifetime membership for helping me get this started.  When I officially launch the community, it will cost about $20 per month and prices will increase over time.

This is your opportunity to get in on the ground floor, save a ton of money and get access to a wealth of testing results.  Click here for more information and instructions on how to join.  It is only for people who are willing to work, but I believe that it can become a huge resource for figuring out what works and what doesn’t.

This offer will end soon, so if you are interested, act soon because I will take the page down when all the spots are filled.

Disclosure: I am a student and affiliate of Chris Lori, so I do make a commission if you buy from my site.  But I promote his work because I believe in it and a portion of the proceeds go to my charity organization.  Haji is someone I know personally and get no monetary compensation from him.  He is a cool guy who just so happens to be a rockstar trader.

###

P.S. – If you have 10 seconds to answer 3 simple questions, I would be very grateful if I could get your anonymous opinion on a few things.  This will help me give you more information that will help to solve your specific trading issues.  Just 3 questions and it will be really quick…promise.  Click here to give your opinion.   Thanks!

Photos (in order of appearance): 111 Emergency, NickNguyen, thumbnail by: Midtown Crossing At Turner Park

I hope you find this energizing and puts you on the right track.  Every so often, I have to take a step back and do this exercise because I find myself getting caught up in things that don’t matter and I lose sight of what is really important.

Pick One: Ferrari or Jag E-Type

Choose one of the goals that you want to reach as a result of becoming a profitable trader.  Usually the first thing that comes to mind is a fancy car or a jet.  It’s your goal, choose whatever you want.  I don’t care if you want to become a touring ballet dancer…whatever floats your boat.

Got it?  OK, stay with me, this may get a little weird, but it works.

Now, go sit in a quiet place and only focus on that one goal.  If possible, go to your favorite outdoor spot…maybe in the mountains, or near the ocean…somewhere quiet and inspiring. If that’s not possible, then go sit on the toilet and close the door.

Yes, keep your pants on.  It’s not that kind of activity.

Just keep concentrating on that one goal.  Close your eyes and imagine yourself actually having it or doing it.  Now the important question…how does that make you feel?

I mean REALLY feel.

Is that something that you absolutely want in your life?  Think about it for at least two minutes.  After some reflection, you may be surprised at the answer.

My Goal is to Own an NBA Basketball Team

At one point, that is what I thought.  It’s not that I think it’s impossible, it’s just not truly in line with how I want to live my life.

A very cool idea, no doubt…but I can think of much better things to spend that kind of money on.

Another example is I want to have a Porsche 911 GT3.  I sat down to reflect on how I felt about that and I realized that I still want one.

Yes, it’s showy

Yes, I could be called a douche

But I love cars and it would be fun.  So that stays on the list.  But that is minor…

What Are Your BIG Whys?

One of the major reasons that I want to learn to trade successfully is so that I can surf in different parts of the world.  So far, I’ve “only” surfed in Hawaii, Mexico, Washington (State) and California.  I want to surf in places like Indonesia, Australia, Tahiti and South Africa…just to name a few.

Of course this involves a lot of travel, another thing I love.  Here is a video I took recently of a fun day surfing in Hawaii and a couple of pictures of me on my first trip to Europe (Poland and Estonia) last year.  These are two of my Biggest Whys.

I forget who this guy was, but he had a sweet 'stache (Estonia)

We had a private tour of the Wieliczka Salt Mines in Poland, one of the most amazing things I have ever seen. That is ALL salt, even the chandeliers.

Now it’s your turn.  What do you really want?  Pull out your goal list and see which ones should stay and which ones should go.  What can you add?

It might be being able to have time to spend with your kids or having a comfortable retirement…or a Lambo Aventador.  The only thing that matters, is that it matters to YOU.

Keep these goals in mind every time you trade or backtest and they will help you stay on track. 

If you don’t mind sharing, I would love to hear about your biggest reasons for wanting to be an all-star trader…leave a comment below.

###

I didn’t do a whole lot of blogging because I’ve been working on a community (launching this month), but here are the top three:

1. Interviewed Pro Trader Adam Jowett and found out how he became a professional trader WITHOUT a mentor.
2. Posted (what I consider) the Ultimate Free Education Resource if you are looking to learn a lot about Forex without spending a dime.
3. Discovered a really exciting free mobile Forex charting app that I believe is going to revolutionize how you use charts on your tablet or mobile phone.

Now on to the trade review:

The final result for this trade was a +0.37% gain on the account and a +7.62% gain for the year. If you want to see all of my results, check out my MyFxBook Report and see how I started trading this strategy.

Do you post your trading results online?  I would love to see them (if you would like to share), feel free to post a link below so everyone can learn from what you are doing.

###

Who would have thought that there would be a day when we actually started calling laptops “bulky.”

But alas, every new offering from brokers and third parties alike, have been pretty much the same ol’ same ol’.  Trade execution has never really been the issue (in my experience). That has usually been pretty good.

What has been disappointing has been the charting.  If you wanted anything more than just lines on a chart, you were SOL.

No crosshairs, only a handful of indicators and you want more than one chart on the screen?  Ha!  Good luck with that.

But I can across an app a couple of weeks ago that I consider a huge leap forward in mobile charting.  I think that it could make it possible for someone to trade completely on their mobile phone or tablet.

That might not excite some of you, but to people like me who geek out about the notion of being able to travel and not have to take my laptop, that is tremendously exciting.  What is this magical app you ask?

I did a full review for Forex Crunch and it goes into what I am using now and all the features of this great new app.  It is for iPhone, iPad, Android, Windows Phone and Blackberry…and did I mention that it is free?

Click here to read the full review at Forex Crunch.

What apps do you like to trade with?  Let us know your latest find in the comments below!

###

So whenever I see a setup, I force myself to take it unless it is obviously bad or I’m on a really bad losing streak.  This was one of those cases where it didn’t look like a good setup.  But sometimes the ugliest setups turn out to be the most profitable and sometimes the prettiest setups end up stopping out.

It’s all about sticking to what you learned in backtesting.  Here is the short 2:50 trade review:

The final result was a +1.11% gain on the account.  To see how I started trading this trade from learning it, to backtesting it, to demo trading, then finally trading it live…check out the Wallaby posts.  It is in reverse chronological order, so go all the way back to start from the beginning.  My live trading record for this trading strategy is available here.

What do you think?  Feel free to leave a comment below.

Scamming in my name, not good vibes Mon.

“Holy shit, Bob Marley tickets?  Hell yeah!”

Later…

“Are you going to the Bob Marley concert?  Wait…what?!”

A few of the other more interesting scams where:

• Selling passes to the secret “teacher’s elevator” (some of our buildings had 4 floors)…which didn’t exist
• Huge bags of “weed” for $10 (actually oregano)
• The whereabouts of the “clean” bathroom.  The only thing clean about it was they “cleaned” you of your lunch money.

Yes, I went to public school.

Some of these scamsters probably went on to perpetrate the sale of landmarks or Forex scams…like this guy.  The one good thing that came out of these experiences was I learned what a scam looks like.

A Few Things To Watch Out For

I’m not trying to make you paranoid, but here are a few things that I have seen in the Forex market and how to avoid them.

The EA

I’m not saying that all EAs are scams. Some of them may work and I believe that most of them are created by people who have legitimate intentions.

But as I always say…if you don’t know how it works, how will you know when it stops working?

Almost all EA companies will not tell you how their program is placing trades.  For good reason, that is their business and they are not going to give up their secrets. But that makes it really easy for scammers to create a something that may work for a little while, then blow up your whole account one day before you get home for dinner.

I believe that it is better to learn how to trade for yourself.  That way, your destiny is in your hands…not someone else’s.

The really ugly website with no money back guarantees

I’m not one to judge on appearance because this site isn’t the most beautiful/fashionable site in the world. But I have noticed that if a site is really, really poorly done, that may be a red flag.

I have seen a couple like this and you can smell the scam from a mile away. Things are really misaligned on the page, several different kinds of fonts and pictures that are not sized correctly.  On top of that, they only kind of say that they will return your money if you are not satisfied.

It must say that there is a full money back guarantee for 30 days, or whatever length of time the guarantee is good for.

Too good to be true

This one is obvious, but if someone promises you 200% in a month with little risk, they are probably full of shit.  Sometimes as we are reading a convincing website we lose site of this.  Slap yourself back into reality.

Before you pull out your credit card…

Be sure to do some research on the product that you are thinking of buying.  Do a Google search for reviews on the product and see what Forex Peace Army and Investimonials have to say about it.

If you have any doubt, don’t buy.

Also remember that there are going to be unsatisfied customers, no matter how good a product is.  In the Forex market, people are usually angry for one of two reasons:

• The product really was crap
• They were too lazy to actually put in the effort to make the product work and need someone to blame for their failures

Be sure to try and read between the lines to figure out which one of these two categories the reviewer falls into.  This will help you separate the whiners from the legitimate complaints.

I have been guilty of buying a product before reading the reviews and checking for the money back guarantee first.  It doesn’t happen often, but I do get caught once in a great while…it’s only human, so don’t be too hard on yourself if it does happen.  Just don’t let it happen again!

Those sales letters can be really convincing, but this is a reminder to do your homework before rushing out and buying something.

Have you ever bought something that was a total scam?  Were you able to get your money back? Let us know what you did in the comments below.

###

Photo: kronic.it