{"id":21505,"date":"2011-06-06T11:19:12","date_gmt":"2011-06-06T15:19:12","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=21505"},"modified":"2011-06-06T11:19:12","modified_gmt":"2011-06-06T15:19:12","slug":"do-you-have-a-strong-belief-in-your-trading-strategy","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/06\/06\/do-you-have-a-strong-belief-in-your-trading-strategy\/","title":{"rendered":"Do You Have A Strong Belief In Your Trading Strategy?"},"content":{"rendered":"

Do you trust your trading strategy?<\/strong><\/p>\n

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If a trader does have trust in the method they intend on trading they will find it hard to stick to the system when hitting a period of drawdown<\/strong>.<\/p>\n

If a belief is not established through the testing process – the trader may well be influenced to diverge from the system when going through a protracted drawdown.<\/p>\n

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Back-testing could help the trader become acquainted with the inescapable equity swings they will most likely meet and allows for fine tuning\u00a0at an early stage of the system development life cycle.<\/p>\n

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What are the benefits of testing a system?<\/p>\n

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One benefit of manually testing a discretionary strategy is that, as referred to above, you will acquire a familiarity with the approach you mean to trade live.<\/p>\n

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Simulation testing can extend a good deal of useful statistical feedback related to a trading system and can be actioned on a mechanical or discretionary basis. There is validity in both approaches and the system you are intending to test will determine which method you utilise.<\/p>\n

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One benefit of manually testing a discretionary strategy is that, as mentioned above, you will gain a familiarity with the approach you intend on trading live.<\/p>\n

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Please see this\u00a0Forex strategy testing<\/a> post for the entire article.<\/p>\n

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The construct and initial principles of the system you intend on testing should be committed to paper before testing begins.<\/p>\n

We will now look at a simple (example only) trading strategy to test:<\/p>\n

\u2022 Test trade entry criteria.\u00a0 Inside day candle high is passed.\u00a0 Enter the trade if price has moved 10 points above the inside day.<\/p>\n

\u2022 Test trade exit criteria.\u00a0 Exit when a 50 point trailing stop has been triggered.<\/p>\n

\u2022 trade test hours\u00a0between 07:00 \u2013 13:00 GMT Monday \u2013 Wednesday.<\/p>\n

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The preceding simple rules <\/strong>could constitute the basis of testing<\/strong>.<\/p>\n

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Ensure you test the system on dissimilar market conditions including both ranging and trending periods.<\/p>\n

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Also test on several currency pairs as\u00a0some strategies seem to test better than others on particular Forex currency pairs.<\/p>\n

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These are a few of the components I document when carrying out a manual testing session, <\/strong>in addition to<\/strong> the primary rules I specify as my trade entries and exits:<\/strong><\/p>\n


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\u2022 What constituted the best exit from each trade?\u00a0 In other words how far did the trade ultimately go before reversing?<\/p>\n

\u2022 Would this system bring better results, on a series of trades, with a bigger or smaller stop?<\/p>\n

\u2022 How is the trading system affected if I remove periods of low liquidity i.e. no trading during US or European holiday periods?<\/p>\n

\u2022 What was the maximum drawdown experienced?<\/p>\n

\u2022 What was the biggest series of losses the system experienced?<\/p>\n

\u2022 Does this trading strategy work well on some currency pairs and not on others?<\/p>\n

\u2022 How did the method perform in ranging markets?<\/p>\n

\u2022 How did the method perform in trending markets?<\/p>\n

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For more posts:<\/p>\n

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Forex tutorials<\/a><\/p>\n

Trading Psychology<\/a><\/p>\n

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Do you trust your trading strategy?   If a trader does have trust in the method they intend on trading they will find it hard to stick to the system when hitting a period of drawdown. If a belief is not established through the testing process – the trader may well be influenced to diverge … <\/p>\n

Continue reading “Do You Have A Strong Belief In Your Trading Strategy?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-21505","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/21505","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=21505"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/21505\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=21505"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=21505"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=21505"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}