I have a system I have created that seems to be profitable, I understand and am confident in. It backtests VERY well, but, it forward tests even better. The only issue I have left is in Risk. The system uses moving averages, some of which go over 50 4h bars. Because of this the pip value of my stop needs to be quite large, and, given my 2% rule algorithm that sizes my position based on Risk using stoploss. The system has in the past month returned hundreds of pips, but it's slow, with each trade taking a week to weeks.
The problem is that I have expectancy, and high return on each trade and the system doesn't open trades often... so using such a tiny position size returns tiny profits. I'm torn over just tossing the 2% rule but am hesitant to allow a 20% drawdown if all the pairs flip at the same time on me and I get stopped out of every single position concurrently.
If I tighten the stop the back test show dramatically lower profits as spikes seem to trip it up often. Right now the best stop I can use is a trailing stop based on a EMA 50, which is often about 80 pips (depending on the pair.).
What should I be considering next?
The problem is that I have expectancy, and high return on each trade and the system doesn't open trades often... so using such a tiny position size returns tiny profits. I'm torn over just tossing the 2% rule but am hesitant to allow a 20% drawdown if all the pairs flip at the same time on me and I get stopped out of every single position concurrently.
If I tighten the stop the back test show dramatically lower profits as spikes seem to trip it up often. Right now the best stop I can use is a trailing stop based on a EMA 50, which is often about 80 pips (depending on the pair.).
What should I be considering next?