How can you ever know when you are actually right about Stock Market ?

A good way to know if you are right also in the method of "back-testing," which at least indicate whether the system is working is actually working.

For example,

Say I have a particular system in mind that deals with operations that are triggered when a stock has a new record, breaking through previous resistance. Why not choose a date at random, and find all the stocks reaching new 52-week highs on that date?


Through the track as if you were to put real money on the table. If you can perform this process in an impartial manner for 100 different operations, then you have an idea of ​​whether that particular system works. Importantly, be honest and not cheat to make the numbers look better!

If you are able to achieve an overall benefit

(Hopefully a good pretty) as a continuation of 100 simulated operations, then it just luck? No, chances are, you might be right. Have a good look at that system, where some hard and fast rules around, and then retest the trades. Then take action and work with that system.

The most important

You keep your losses small - the loss of almost 50% of its capital immediately trade is described as suicide by his capital. You should not risk more than 1-2% of its total capital in any one trade. That gives you a lot of "leeway" to breathe if a pair of operations that go against you.

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