Traders go in search for a winning trading system not understanding that after they find one that making a few crucial mistakes can turn a profitable system into an unprofitable one. Once you have a system that seems robust from historical price data, chart studies, or back testing be careful not to make some of these crucial mistakes:

  1. Not honoring your original stop losses. Big losses make winning systems losing ones. Profitable trading systems keep losses small.
  2. Don’t get frustrated and quit trading it during drawdowns. All systems have losing streaks, the key is to manage risk and stick to your plan until the system has time to work out with profits as the market becomes conducive to your system’s method. Some systems need price ranges and others need up trends, most trading systems break down in volatile markets are down trends.
  3. A lack of discipline, drifting from taking defined entries and exit signals to  your own opinions and emotions is hazardous.
  4. Trading too big can create big losses and even account blow ups, no system can survive huge position sizing that makes the first string of losses the last.
  5. Style drift is deadly, slowly changing your trading system during active trading is not a good plan. Research has to happen after hours when the market is closed and backtested before changes are made.
  6. If you can’t mentally and emotionally deal with the equity curve of your trading style then you can’t trade it long term. You can’t quit during losing streaks or get too excited during winning streaks.
  7. You have to believe that your method will work over the long term, confidence comes from research, backtesting, and homework.
  8. Don’t trade someone else’s system, build your own. Custom to fit who you are by using the principles that you believe in and work.
  9. Trading too big during losing streaks ruins the potential of winning, don’t try to get back the money the market took from you instead try to stop the momentum of your losses by trading smaller and smaller until a new winning streak emerges.
  10. Straying from your trading plan and making one big, bold, can’t miss trade and blow up all your previous profits. Don’t let greed make you do something stupid, stick to the plan.

In the long term discipline, consistency, and hard work leads to profits not predictions, opinions, and big bets.