The 50 Trade Challenge

Life is full of challenges, some are thrown at us and others we undertake willingly to test our metal/resolve/abilities etc. Climbing a mountain, running a marathon, completing a an assault course (done a few of those!), sitting an exam to achieve a qualification, doing a cryptic crossword, playing a game of chess or scrabble, you get the idea. If and when you achieve a challenge you have set yourself, without doubt one normally feels a sense of achievement and in the process you may well have learnt more about yourself and grown as a person. Learning to trade is challenging too, but there are some things we can do which include minor challenges to help us learn and progress as traders..

At the recent Online Traders Forum, attendees were shown in great detail, 5 different trading strategies. Then my friend and trading colleague Paul Wallace challenged the attendees to pick one of those strategies and then to take 50 consecutive trades using the exact rules of the chosen strategy. Once they have done this, to then assess the strategy’s effectiveness based upon the empirical data, that they would then have. If you would like to grab a copy of the over 3 hours of webinar material/recordings you can do so here:

Online Traders Forum Q2 – 2019

BUT the real point of doing this exercise is not really to assess the strategy, it is more of an exercise to see how Patient and Disciplined you are as a trader in following your trading process! Are you patient enough to actually wait until the right set up occurs rather than trying to force the market to give you pips when it is not ready to? Are you disciplined enough to follow the strategy and your risk and money management rules to the letter, over a prolonged period?

I should point out that if you break your rules at any point during the 50 Trade Challenge then you should start from Zero again!

I would take this even further. When I was ‘Learning How To Trade’ one of my mentors insisted that we had to back test each strategy we were taught, by taking at least 500 if not a 1000 trades, then analyse the results and send them to him for scrutiny and assessment. If you are going to back test then you could use historic MT4 data or even better use this highly recommended back testing software. At the end of back testing a strategy, you will know it inside out and it will be second nature to implement it, without hesitation, in the live market, whenever it sets up. A lot of ‘traders’ say back testing is a waste of time, I would argue that when back testing is conducted in an intelligent way and the resulting data is given a thorough ‘So What?’ test and analysis, it can be a highly effective means of:

  • Helping you to understand your strategy inside out. (Tip: write out all the rules and follow them).
  • Helping you to follow and indeed improve your trading process.
  • Seeing what the market conditions were like when it worked.
  • Seeing what time of your day the setup occurred.
  • Seeing what day(s) of the week were best to trade it.
  • Seeing how long it took to hit your set target(s).
  • Identifying when is/was the optimum point to move to Break Even.
  • Establishing your potential Edge!
  • Starting to overcome Fear and Self-Doubt.
  • Helping you to stick to your plan.
  • Drive the strategy rules and setup from your Conscious to your Unconscious, and thus easily be able to identify the set up and then implement the strategy without hesitation. It should become second nature.

Once your back testing is out of the way then, only then would would I trade the strategy in the live market armed with all the back testing results knowledge. Plus I would only use one micro-lot position sizes or 10 pence a pip if spread betting to undertake the 50 Trade Challenge in the Live Markets. This means it is Real Money but is affordable and far less risky.

Alternatively, you could initially trade it in a Demo Account for 50 Trades and then 50 Trades in a Live account using those small position sizes.

If you are going to go Live straight away, I would trade 25 Trades to get my eye in and then a further 50 Trades and then look at the results for 75 and then for the last 50 and see if your performance had improved over the last 50.

‘BUT’, I hear you say to yourself, ‘that means I’ve got to do some work and actually hold myself to account for my trading performance!!’ That is exactly the point. Unless you can do the above I doubt you will progress into first a ‘Break-Even’ trader and then a ‘Consistently Profitable’ trader. Good traders don’t think about the money they could make, they concentrate on getting their trading process right and continually work on improving it, and they let the pips take car of themselves. They stick to their plan and trading rules, they are patient and disciplined, they protect their capital by not feeling the need to be in the market all the time and have strict risk and money management rules. Plus they know their Edge.

Top Trading Tip: If you are a new or struggling trader, I challenge you to undertake the 50 Trade Challenge and see if it has an impact on you as a patient and disciplined trader and your ability to follow your trading process. Remember this is not initially about being profitable but is more about you being able to follow your rules and develop your patience and discipline, discover your Edge and so on. Go to it!