I cannot stress this point enough. It's imperative you backtest every possible system or method strenuously! This will become your bread and butter, your "go to" for building profit, drawing income, and producing wealth. It needs to stand the test of time, in different market conditions. It needs to remain unchanged for a long period of time because this is how you will survive drawdowns. Which brings me to my next point. Your system has to be able to be properly backtested having past data and indicators remaining the same, whether you're looking at live data, or past data. Meaning the buy and sell signals remain the same once each bar finally closes, past or present. And this is where approaches like the Elliot Wave Principle fall apart. These types of approaches can never be properly back tested because they are always using projections of what is to happen in the future but valid wave counts, when live, can change. This means as you back test with old data, the picture and count may appear extremely clear yet when you were looking at that same data being drawn live, the picture was murky and full of different possibilities.
When backtesting, your approach should be 95-100% accurate when comparing live data to past data. This allows you to see just how profitable or unprofitable your trade method is over a period of time, and make necessary changes if needed. You also need to make sure enough sample data is tested. For example, if reading 1-5 minute charts, 2 months of data is great. Swing trading (30-240 min charts), 6 months - 1 year, and daily charts, 1-2 years of data testing is good. Me myself, I trade the smaller time frames but instead of testing just 2 months, I went ahead and tested 6 months, just to be sure I had a good reliable system. I stayed up at all hours of the night/morning for weeks, testing every time frame, and then multiple time frames on the same chart to find the absolute best sweet spot for each respective market I wanted to trade. Like I said, if you really want to be successful, it's not cheap. You have to put the work in. It takes a very long time to be an overnight success.
Once I found it, I still only paper traded for a few months to get used to initiating trades in real time and to get a feel for what results I could expect. Only when my real time results matched up with the past backtesting reports did I pull the trigger on my first trade. This is what you need to do. It feels nice to pull in profit but never forget how easy it is to lose in this game. If your system does not hold up and you take shortcuts by not ensuring you have looked at every possible outcome over time, it will cost you, I guarantee it. Success in this business is not by chance. Success come to those who plan for it and execute strategies that have a proven track record. Put your ego away and backtest the hell outta your approach and I promise, you will thank the gods you did.
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