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How to do the perfect back testing for your new system

There are many traders in the forex market who are struggling hard to make money by trading the live assets. If you look at the statistics then you will notice that only 5 percent of the traders are making consistent profit in forex trading. So if think that you will become rich over the night by trading the live assets in the forex market then you are completely wrong. if you truly want to make money via forex trading then it's highly imperative for you to understand the basic of the forex market and risk associated with trading. Most of the novice traders fail to achieve success in the exchange traded funds community since they don’t know to trade the market properly. In this article, we will discuss how to develop valid trading strategy and back test it.

Develop a balanced structure: The first thing that you need to is to develop a solid basic in forex trading. If you don’t develop a solid basic then you won’t know about the features that your broker should provide in order to do the best analysis in the market. However, if you want to save time for selecting your broker then you can go for the Saxo since they are well reputed and provides an extremely robust trading platform to their traders.


Figure: Smart features offered by Saxo

So once you develop strong basic in the forex market you should make sure that your system takes care of all the major three types of analysis in the forex market. Let’s break it down a little bit more. Singapore is very advanced country and nowadays we can see that the traders of Singapore are doing relatively well in the forex industry. So how come they are so successful in this industry. The reason behind their success is they chose a reputable broker for trading the exchange traded funds and use their demo trading account to develop a valid system in the market. Make sure that you don’t make your system too much complicated since most of the professional traders in the world are making money by simple trading strategy. To be a precise long-term success in the forex market remains hidden under simplicity and strict trading discipline.

Checking your system: Once you have your own prototype of trading strategy, you should check with historical market feed. For instance, if you developed your trading system based on Fibonacci retracement tools and then you should check the key swing highs and lows in the market and see how it works in the various time frame. If you in involved in the exchange traded funds then make sure that you also do the fundamental analysis since it will help you to avoid the false spike in the market. When you do the backtest note down the result of 10 trades that you execute in the market. And out of 10 trades if 5 of them are winners then you can assume that the system can generate profit in the long run provided that you are following 1:3 risk reward ratio. The different system tends to work differently with different assets in the market. So make sure that you analyze the market very precisely and find the best suitable pairs in the market which suit yours trading systems.

Summary: Developing a trading strategy in the forex market is not an easy task rather it is one of the most complex tasks for the traders. Once you develop your own trading strategy in the market make sure that you back test your system with the different time period and different market conditions. And if you want to save time then you can use the forex simulators since it’s a great way to analyze the performance of your system. And always keep the risk management factors in mind while developing your system in the market since it’s the key ingredient for long-term success.

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Comment by 席晓东 on May 12, 2017 at 12:57am


Yes, the Chinese private enterprises are now the largest shareholder of Saxo.

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