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It doesn’t take much effort or money to do proper testing. You can download a demo version and compare the results.
It is possible to make a modest profit for almost every entry and trading year. But you need to carefully select the risk according to your needs and expectations.
All the tests are very time consuming, but I think it is worth it. We humans have a problem with absolute and relative results. One trader may have a lot of money, the other one has a little money to trade. One is risk averse, as I am. The other one can take high risk without losing sleep.
Basically, currencies don’t go away. They never declare insolvency. Money has always been around because it is something that people need.
I wanted to find out why some currency pairs work well and others don’t. And I tried to improve the results for the ones with the bad results. Today I don’t do that anymore.
There are so many indicators. So what does an indicator do and how do you pick one?
Once I had to sit in front of the screen all the time. Today I am glad that I no longer have to do that. Your broker can decide to change the rules in the middle of the game. What is our goal here? You want to define rules about what you do and what you don’t do in a way that your computer can do it for you.
Most things are not a problem as long as you experience this in a theoretical strategy test – within a few seconds. However, if you see a potential equity loss of $80,000 in your real money account, it is a completely different emotional experience.
If you use a simple moving average, how do you know if the one for 20 candles is better than the one for 30 candles? Some people act based on a handful of results, but for me, nothing with fewer as at least 1000 trades is considered to be a system. Testing outages and problems is exactly what demo accounts are for. Some beginners think that demo accounts are a waste of time because they want to make real money right away.
It is always a good idea to invest some time to find the broker and the account type that is right for you. Would you think that a $100,000 drawdown is okay? Or is it too much?
You can teach the system some rules that it will strictly follow. However, this also means that such rules will be followed if the underlying data for them is incorrect.
Most people I know from my German course told me they spent money for things that didn’t work.
Some people pick the trailing stop loss. Other people pick a fixed stop loss. Rookie traders often have no references and no experience with outstanding situations. They are the first to get wiped out.
My computer can calculate and trade entry signals in a split second. If I would try to do all the calculation in my head, I wouldn’t even be able to do a back test for a single year or a single currency pair.