$300 Start up in a Mini a/c - What trading system could increase this to $1000/month

Quoting jimtsa

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I guess my one is pretty good. Has anyone developed any MT4 auto trade as well?

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Quoting jimtsa

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I guess my one is pretty good. Has anyone developed any MT4 auto trade as well?

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Quoting aicccia

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I've turned 100-200 into close to a 1000 twice over a 8-10 week period. Once around July 2006 and then not long ago from january to end of febuary of this year. Each time I briefly flirted with 1000 and then everything went to hell.

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Quoting Circafx

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I typically hear that to have any chance of success in forex, one should start with at least a 5k trading capital.

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Quoting paul2

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You guys are focusing on the wrong things. Your focus shouldn't be on how much money you're making per trade, or how much money you need for this or that, how long till you double your account, etc. Your focus should be on trading, and only trading.

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Quoting megadave5000

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I have not heard one good thing about MT4 backtest data. I understand that a good way to see if your backtest is reliable is to forward test your "system" and then backtest it over the same period. See if your backtest gives the same results as your forward test. Otherwise, the results are suspicious at best.

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Quoting jimtsa

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Thank you for your comment.
What do you mean by forward testing?

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Quoting megadave5000

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Forward-testing is the exact opposite of back-testing. When you foward test a system you do so in real-time, the here-and-now, as price is moving in the present. You aren't going over past data like you are in a back test.

Test your system in a demo account in real-time, say from July 1 to July 31. Then, after that period, back test your system over the same time period to make sure it picks up the same trades it did in real-time. If the system gives different results over a back test then it did in a forward test, your backtest data is completely unreliable or at best it is suspect..............

-=DAVE=-

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Quoting jimtsa

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Thank you very much for your explanation Dave.
What brokers will let you open a Demo account for more than 30 days?
I use the Demo Account on Metacoder and it seems working well with my ex4. But after reading your comment, I want to know how to forward test my MT4 file better.

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Quoting jimtsa

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Thank you very much for your explanation Dave.
What brokers will let you open a Demo account for more than 30 days?
I use the Demo Account on Metacoder and it seems working well with my ex4. But after reading your comment, I want to know how to forward test my MT4 file better.

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Quoting megadave5000

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Forward-testing is the exact opposite of back-testing. When you foward test a system you do so in real-time, the here-and-now, as price is moving in the present. You aren't going over past data like you are in a back test.

Test your system in a demo account in real-time, say from July 1 to July 31. Then, after that period, back test your system over the same time period to make sure it picks up the same trades it did in real-time. If the system gives different results over a back test then it did in a forward test, your backtest data is completely unreliable or at best it is suspect.

Why is this important? Well, let's take a simple example of moving-average cross-over system. Any two moving averages will do. Have you ever watched a cross-over happen in real time? First the averages approach each other. Then they touch. Then they may separate....cross...uncross....deviate....cross again....uncross....cross yet again and continue onward. Every time they cross or uncross in this simple system during a forward test, the system could be spitting out a new trade. But when you look at backtest data, all you see are the single crosses! Real time trading is much different that back-test data.

Not to mention the fact that you are dealing with a huge amount of uncertainty in a forward-test, which leads to two things. First, backtest data is already there, you can program a system to perform well over almost any timeframe, and this is commonly called "curve-fitting" or over-optimization. The danger is that a system doing well over one particular time period may not perform nearly as well over other periods in the future. Markets do not always behave as they did in the recent past, just watch what usually happens in August or the last two weeks of December. Or, take a look at November of 2006 and focus on the EUR/USD or GBP/USD versus how those same pairs did in December of 2006. Every trending system made money in November, and got dumped on in December.

Likewise, ranging systems didn't fair so well as the dollar dropped off in November, but did much better in December. The trick is, how would you know in advance to follow the trends in November and leave things alone in December? When you figure out what works one month over back-test data, make sure it doesn't bleed you to death during other not-so-favorable conditions. Some of the best trend-following systems have a very low win rate, but when they win they really bring home the bacon. The rest of the time they're taking small losses and just treading water. They're there to capitalize on the really really big moves, not to churn out 20 pips a day or 5 pips each trading session. They're robust enough to handle the drawdowns and not over-optimized over one particular time period. More often than not, the entry and exit criteria are very simple. Just look at the Turtle Rules and see how they're really based on easy-to-use Donchian Channels. Nothing complicated about that!

Second, the uncertainty involved in real-time trading leads to poor decisions based on emotional thoughts, not rational thoughts. Trading is really an exercise in making good decisions based on limited information. This is what attracts many traders to mechanical systems - the human emotion is taken out while the human mind is still involved (it takes a human brain to decide under what conditions to trade, and then code this into a program which analyzes the market).

It's easy to test over past data and say that even though you watched your system drag you through a 40% drawdown you'd stick with it because the next two months you made 250%. That's fine, but before you made the 250% you would have no way of knowing that it was right around the corner! How would you feel in real-time watching your account drop by nearly half? Would you still feel confident that this is the system you want to run or would you start "tweaking" it? Would you keep trading your system no matter what based on how it did over past data? Would you start cutting your winners short because you just want to have a winning trade? Emotions can distort your reality, and this applies doubly to trading where real money is on the line and is being won and lost.

I know how to turn turn a $300 account into a $1000 account in a few weeks that is virtually guaranteed to work. Go to work, get paid, deposit $700 into the account. Beyond this, there is no guarantee. It is very hard to make money trading as a new trader. This will probably be a difficult endeavor and its better to start asking applicable and relevant questions sooner rather than later. Instead of worrying about how many pips here or there or how turn X amount into $100k in three months, worry about your money management and figure out what type of risks and volatility your system can handle. Winning trades will come just by the law of averages. Will the losing trades you encounter blow you up?

Here's a final thought about turning a small amount into a large amount. I will argue that no matter what, you have a 50/50 shot at winning on any given trade - a coin flip (many people will say different but I contend its true). Let's say you are feeling aggressive as most new traders are, and were going to risk 20% of your account on every trade. You're starting with $300 shooting for $100,000. On the down-side, you lose three times in a row before reducing your balance to $153.60 and you'd probably need to deposit more margin to trade certain pairs depending upon your broker, in other words you're out. Now, if you made a whopping 100 pips on each winning trade (or roughly 33% return on equity depending upon the currency pair), it would take 20 winning trades in a row to compound your way to $100,000 (you'll be just shy of $100k but we're close enough). Twenty winning trades doesn't sound like a lot to ask does it?

The odds of winning 20 in a row are staggering with 50/50 odds. Take .5 to the 20th power and see what you get: 0.00000095 or about 10 in a billion. While not in the realm of impossible, you are well within the world of the highly improbable. What about a better system that gives you a 75/25 chance? Take .75 to the 20th power and get 0.0032. A huge improvement but still only three in one thousand! Your odds of losing three in a row from the staring point are much better - about 13%.

How about a more modest 10 winners in a row which will only get you to $5200 from the starting $300? Take .5 to the 10th power to get 0.001. You have a one in a thousand shot at getting ten winners in a row if your system gives a 50/50 chance of winning each time. What about the better system that gives a 75/25 chance? Take .75 to the 10th power to get .0563 - or about six in one hundred. Still not that much of an improvement. Do you see why this trading thing is so hard?

The point is, the odds aren't with you on turning a small account into a large account. That is why there are lots of forex brokers out there. Its easy to take people's money in a game that stacks the odds against them. The sooner you realize this the quicker you will understand that trading isn't get-rich quick nor is it get kinda-rich quick nor is it turn $300 into $1000/month quick. There's an old joke about trading that goes something like this: How do you make a small fortune in trading? Start with a large one.

-=DAVE=-

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Quoting adsanders

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Thanks Dave for the awesome advice. I couldn't agree with you more.

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