Don’t quit your job
Don’t write your backtesting engine
Expect to spend 3–5 years coming up with remotely consistent/profitable method. That’s assuming you put 20h+/week in it. 80% spent on your strategy development, 10% on experiments, 10% on automation
Watching online videos / reading reddit generally doesn’t contribute to your becoming better at this. Count those hours separately and limit them
Become an expert in your method. Stop switching
Find your own truth. What makes one trader successful might kill another one if used outside of their original method. Only you can tell if that applies to you
Look for an edge big/smart money can’t take advantage of (hint — liquidity)
Remember, automation lets you do more of “what works” and spending less time doing that, focus on figuring out what works before automating
Separate strategy from execution and automation
Spend most of your time on the strategy and its validation
Know your costs / feasibility of fills. Run live experiments.
Make first automation bare-bones, your strategy will likely fail anyway
Top reasons why your strategy will fail: incorrect (a) test (b) data © costs/execution assumptions or (d) inability to take a trade. Incorporate those into your validation process
Be sceptical of test results with less than 1000 trades
Be sceptical of test results covering one market cycle
No single strategy work for all market conditions, know your favorable conditions and have realistic expectations
Good strategy is the one that works well during favorable conditions and doesn’t lose too much while waiting for them
Holy grail of trading is running multiple non-correlated strategies specializing on different market conditions
Know your expected Max DD. Expect live Max DD be 2x of your worst backtest
Don’t go down the rabbit hole of thinking learning a new language/framework will help your trading. Generally it doesn’t with rare exceptions
Increase your trading capital gradually as you gain confidence in your method
Once you are trading live, don’t obsess over $ fluctuations. It’s mostly noise that will keep you distracted
Only 2 things matter when running live — (a) if your model=backtest staying within expected parameters (b) if your live executions are matching your model
Know when to shutdown your system
Individual trade outcome doesn’t matter
PS. As I started writing this, I realized how long this list can become and that it could use categorizing. Hopefully it helps the way it is. Tried to cover different parts of the journey.
This post is not about “setting up your first trading bot”. My own first took me one weekend to write and I launched it live following Monday, that part is really not a big deal, relatively to everything else afterwards. I’m talking about becoming consistently profitable trading live for a meaningful amount of time (at least couple of years). Withstanding non favorable conditions. It’s much more than just writing your first bot. And I almost guarantee you, your first strategy is gonna fail live (or you’re truly a genius!). You just need to expect it, have positive attitude, gather data, shut it down according to your predefined criteria, and get back to a drawing board. And, of course, look at the list above, see if you’re making any of those mistakes 😉
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