Backtest
So overlooking crucial step: A lot of people just jump into demo trading or even open a live account with a brokerage firm and start trading with real money without any data, any system, nothing. Never, ever trade—whether demo or live—without a solid trading plan already constructed. How do you construct a solid trading plan? By backtesting.
Trading is super unique in this regard. Imagine that you want to open a restaurant. Is there any simulated market of your city? For example, could you open your laptop and see on the screen the exact same population, buildings, and average pay to simulate opening a restaurant in such an environment? For now, this is impossible. But trading is very unique because you can simulate your business in a real-life environment. It feels like sci-fi, right? But it’s true. Before you start risking real money, you can completely test your business on simulated account—live data or historical data—so it is like you are really running the business in real-time but without any risk. It’s like a parallel universe.
It takes time to fully backtest your business plan and gather some performance data. It’s not a one-day task, but this is a business and not a get-rich-quick scheme. Using this trading perk is a must.
