What is a good trading strategy?

Hi all,

Curious about your thoughts on what defines a good trading strategy?

Personally, I think these steps are decent to filter out most..

1. Find a repeatable pattern in the markets.
2. Test this pattern with different management styles.
3. Collect a large sample size of trades over years of quality data.
4. Trade the strategy live to collect forward data, compare this with your back-test.
5. Track your live returns with your back-test and set boundaries such as Max DD etc.

Sadly, most traders cannot share either a live trackrecord or prober back-test. I think this industry needs both..

After validating the testing performance of your strategy, you validate the strategy by analyzing the live trackrecord to make sure it is not a martingale or grid system.. because they ALWAYS explode. (The easiest thing to do is to check someone's floating P/L, not the realized DD)

Curious what you're thinking and what you define as a valid or proven strategy!

you have good consistent results in TE

when trading an investor's money then no way how to do that without a track record - all prop firms require that.

in social trading, there is a track record too available.. but small investors don't recognize martingale/averaging/grid strategies and often get trapped in nice historical profit curves.

then there are problems with SL.. I admit this is a problem for me too.. It is better to reach -20% DD in 10 deals rather than in 1-3 deals. For diversification purposes it is much better to get into DD smoothly/slowly (several days)... this is my mistake. Now adjusting my EAs to a different approach.

For example, see here how badly that looks in my case:



when profits are too fast or looses too fast - this is bad for investors.

and here might think that is badly performing EA but... for fast/slow DD/profit consideration this is much better:


but problem is - small investors (in social trading) want to see fast profits.. or i want to see fast profits? For me, DD 40% is ok.. because this is on 1 account only. when compared to all my n accounts capital that 1 account 40% DD is 20x less... so I risk 2% actually.

of course, those bad accounts attract more investor money (even from Darwinex itself)... but in my point of view, much more stable (but ok not so profitable) attracts less capital.

I work with portfolios of EAs on n accounts in n brokers. For example, Darwinex put their risk management over my results so investors do not get 40% DD but 15% DD.

I am just thinking/learning.. thanks to your thread and TE.. really good and inspiring consistent results have

(hope my Darwinex screenshots won't be considered advertisement... but ok who cares.. anyway I feel I am not welcomed here in FF... )

Hi mate, thanks for your input!

Definitely true, personally I just risk around 0.30% per trade to keep my Max DD far below the 10% mark, this is what I find comfortable and would recommend many, especially beginner traders.. most just risk way to much and blow accounts.

Regarding the big pullbacks vs crashes in someone's trackrecord, you're right that a big and quick crash in your trackrecord would suggest that something is a bit off. Unless the strategy you're trading had a lot of trading opportunities that due to probability just did not play out.

Thanks!

Goodmorning!

Here are some more tips regarding strategy development and the process I wished I knew from the start..

Let me explain more about point 1 shared above: "Find a repeatable pattern in the markets"

Finding a pattern in the markets is extremely difficult for many due to the fact that everyone is sharing their strategies and most are based on subjective ideas the traders have.. meaning that they rely on some news that came in or just a feeling today about the markets. Other obstacles can be that they rely on indicators to much.. Which can work, but the probability of consistency is low..

Instead, there are a lot of great research papers and books written about patterns that still work today.. simple repeatable patterns you can use for entering the markets, from there you create your own management style.. stoploss placement and targets!

Example of good simple and repeatable patterns can be found through the research of Larry Williams which created strategies like The Smash Day Pattern etc.. just do some research

YES! We've been sharing our trackrecord for a while here now... (more or less the only ones in this entire industry)

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