How can i backtest this strategy?

[Faceman78]

Even the AUD/JPY long I mentioned, I was correct with the move as it happened, just got bored with the sideways action.

I like to target big moves off large timeframes, but time the entries off smaller timeframes. That way I can keep my stops tight, but still get into big winners. I wouldn't be able to program it, targeting the areas is too discretional. None of it is rocket science tho, just use a number of common tools.

Sorry... but what are you adding to the argument here? aside from telling us you are quite the Fx trader.

 

[Barramundi]

Sorry... but what are you adding to the argument here? aside from telling us you are quite the Fx trader.

The thread starter requested 'If you can give me any pointers in finding a better edge I would be most grateful.'

I think I did that. If you're asking me to specifically detail my trading plan on the internet, it's not gonna happen....

 

[Paulie_5]

ok now I am getting you, trading a 65% edge with 1:1 RR agreed requires excellent execution. I just purchased a book on programming EAs into MT4 so I am hoping to totally automate this strategy also optimise the SL and TP and see how it works on different instruments.

It sure sounds like you have an excellent trading edge however I am yet to find an edge that I am able to trade with high hit rate and at least 1.5:1 RR. If you can give me any pointers in finding a better edge I would be most grateful.

re - your point on 6 losses in a row, this for me would come down to money management. If I risked 2% per trade my account would be sitting on a 12% loss, whilst not ideal I would like to think I would trade through this. 10 losing trades would occur approximately once every 10,000 trades so I should be able to ride out the storm. If I risked 5% per trade though I could be in for a wipeout!

Could I ask what book you bought ?

I'm interested to learn more about programming too ... Thanks

 

[MajorDutch]

Could I ask what book you bought ?

I'm interested to learn more about programming too ... Thanks

sure it is available on amazon however you can download a copy from the authors website

http://www.expertadvisorbook.com/ for $25. please note I have no connection with them you can read reviews of the book on amazon.

 

[Faceman78]

The thread starter requested 'If you can give me any pointers in finding a better edge I would be most grateful.'

I think I did that. If you're asking me to specifically detail my trading plan on the internet, it's not gonna happen....

lol, was this thread entitled.. "what is your trading methodology?"

??

 

[MajorDutch]

now now children.

 

[tomorton]

65% win rate, 1:1 r:r and 2% risk per trade is an absolutely fine formula and I would suggest low risk. It's the specification equivalent to a Ford Focus - unexciting, but it will always start in the morning and it won't kill you.

I see a lot of traders pre-occupied with 1:2 or 1:3 r:r, or even greater, and these trades are achievable but not common per any one market per day. So, to keep a smooth income and to keep trading, these traders watch 6 or 8 or more markets simultaneously, they stress, they up their workload and they make mistakes. Each trade acquires a significant potential return, 4 or 6 or more % of account value, and often they can't handle it and allow the gain to go back into the market: at that point they are tempted to push out their stop and double down to try to trade back into the black. Disaster.

Ask yourself how many traders can be making 1 trade per day, with an 80% win rate and a 1:3 r:r, still risking only 2% of their account per trade. If their account starts at £1,000 on New Year's Day, assuming there are 250 trading days in the year, where will they be next New Year's Eve? Post your answer below with reasons why this is not ridiculous.

 

[Barramundi]

lol, was this thread entitled.. "what is your trading methodology?"

??

The person who started the thread asked a question not directly related to the thread title and I answered it. Had it been someone else who had asked the question I may have been more reluctant to answer.

If you're so keen to take an honourable moderator role, perhaps you'd like to review the 100,000 other threads on here and berate people for not sticking precisely to the topic? You'd look like a proper twit.

 

[MajorDutch]

65% win rate, 1:1 r:r and 2% risk per trade is an absolutely fine formula and I would suggest low risk. It's the specification equivalent to a Ford Focus - unexciting, but it will always start in the morning and it won't kill you.

I see a lot of traders pre-occupied with 1:2 or 1:3 r:r, or even greater, and these trades are achievable but not common per any one market per day. So, to keep a smooth income and to keep trading, these traders watch 6 or 8 or more markets simultaneously, they stress, they up their workload and they make mistakes. Each trade acquires a significant potential return, 4 or 6 or more % of account value, and often they can't handle it and allow the gain to go back into the market: at that point they are tempted to push out their stop and double down to try to trade back into the black. Disaster.

Ask yourself how many traders can be making 1 trade per day, with an 80% win rate and a 1:3 r:r, still risking only 2% of their account per trade. If their account starts at £1,000 on New Year's Day, assuming there are 250 trading days in the year, where will they be next New Year's Eve? Post your answer below with reasons why this is not ridiculous.

I dont know the answer to your question. I assume by 1:3 you are talking about losers being £3 in size for every £1 won. if there is an 80% strike rate they should be doing ok.

last 3 trades using my strategy - 2 wins 1 loss. so currently at 66% win rate on a 1:1 with a massive sample size of 3! lol!

 

[trader30]

I dont know the answer to your question. I assume by 1:3 you are talking about losers being £3 in size for every £1 won. if there is an 80% strike rate they should be doing ok.

last 3 trades using my strategy - 2 wins 1 loss. so currently at 66% win rate on a 1:1 with a massive sample size of 3! lol!

***

You now have 2 questions still left.....neither of which are related to whether or not your live trading of the system is profitable. This doesnt actually matter. You caould have 6 losers in a row, its a trading plan, this will happen at some point.

1. Was your back testing over a large enough sample size and are the market fundamentals similar to the current market conditions?

(If your back testing goes back to the 2005, does this really apply to Mar 2011?)

and MORE IMPORTANTLY: 2. Are you LIVE fills (slippage etc) identical to, or similar to, your VIRTUAL fills?

(This is the most important one. You've already tested the strategy as +ve (hopefully) over a sensible sample size and relevant period. Now you just need to see if this strategy works in the live market.)

Dont worry if your trades win or lose. Its irrelevant. Look at the live fill quality compared to virtual fills - which of course are always perfect!

(ps, using IG is a bit silly too. as soon as you become any decent size or regularly profitable you will go onto manual fill and its bye bye edge!)

Good luck!

 

[MajorDutch]

***

You now have 2 questions still left.....neither of which are related to whether or not your live trading of the system is profitable. This doesnt actually matter. You caould have 6 losers in a row, its a trading plan, this will happen at some point.

1. Was your back testing over a large enough sample size and are the market fundamentals similar to the current market conditions?

(If your back testing goes back to the 2005, does this really apply to Mar 2011?)

and MORE IMPORTANTLY: 2. Are you LIVE fills (slippage etc) identical to, or similar to, your VIRTUAL fills?

(This is the most important one. You've already tested the strategy as +ve (hopefully) over a sensible sample size and relevant period. Now you just need to see if this strategy works in the live market.)

Dont worry if your trades win or lose. Its irrelevant. Look at the live fill quality compared to virtual fills - which of course are always perfect!

(ps, using IG is a bit silly too. as soon as you become any decent size or regularly profitable you will go onto manual fill and its bye bye edge!)

Good luck!

answers

1 - no. I am programming an EA so I can backtest over a longer period and different discrete periods.

2. slippage could be a problem on IG index, this morning i got filled 2.2 pips away from my stop order to open despite a winning. I believe I can add in slippage allowance for my EA so will make sure I do this.

Re - Igindex - I know its a pile of pants retail platform but it serves me ok at £10 per pip. note sure I would have the same confidence in it for £1000 per pip. or is the point that I should really use an ECN broker as they wont put me referral?

 

[MajorDutch]

IG index are thieving *******s. I just got hit with 9 pips slippage on a 20 pip Stop loss. they closed me out at -29 pips. This is so wrong. time to change broker.

 

[MajorDutch]

so 3 wins and 2 losses this week. so +20 pips profit less 9 pips slippage from IG.