Every now and then we receive emails from new traders seeking capital to trade their systems. Their academic backgrounds are impressive. They all have worked very hard at fine tuning their strategy based on historical data. They tend to be avid technical analysis students. Most have crunched statistics on their systems to support their claims. However, most lack the trading skills that will help them succeed and stay profitable in the long run.

The thing that most new traders do not understand is that actually developing trading skills is vital. It is not so much finding high probability trades, it is also finding ways to make money consistently. It is all about learning to think like a trader and not like a number cruncher.

So many times these hard working individuals blow up their accounts in a couple of trades. Most do not have the trading skills to determine if their strategy call was just wrong or ill timed. Most likely they will have a hard time learning how to profit from the same play in the future. They will spend a serious amount of time re-crunching numbers to better improve their entry and exit strategies.

In my opinion, the focus shouldn’t be on retuning to the strategy but actually finding out what went wrong. Were you buying into reversal? Were you shorting into a break out? Were you trying to pick a bottom? Were you shorting in front of a huge intraday buyer? Did you size the trade incorrectly for the real risk on your trade? You get my point. With the correct trading skills you can answer those questions, learn to limit your risk, manage your positions better and find consistency in your results.

I created my own blackbox and funded it with credit card money. And yes I lost the first 10k I put into the box. I realized that it wasn’t that the strategy I created was faulty, it was that I lacked some skills that would allow me to think like a trader and not an engineer. It was a huge rip for someone fresh out of college but it was the best money ever lost. It helped  me recognize that I needed those skills in order to find consistent money in the markets.

For those of you spending a lot of time perfecting your system think about developing trading skills first. With them you can learn from your trades. You will then have the ability to at worst minimize your losses. Without them you might completely blow up your account or that of your financial backer.

Best of luck.