You can make yourself a game with the principal of odds. Use 100 marbles. Determine your strategy's give and take by backtesting over 100 trades. Rules must not be broken. Make constant consequent decisions throughout. Mark the losses red(-40pips---this might be increased for some pairs) and then mark the rest of the marbles according to your testing win situations. The number of marbles coloured according to the number of wins that specific ratio has occured in the 100 trades.
Remember to have your entry reasons, your exit reasons written down. All 100 Trades in backtesting MUST be done according to the rules you have specified.
1. White for BE (The number of marbles painted according the number of times BE has occured)
2. Dark green for +40 (The number of marbles painted according the number of times +40 has occured)
3. Light green for +60
4. Blue for +80
5. Light blue for +120
6. Brown for +160
7. Light brown for +200
8. Yellow for +280 Etc!!! etc!!! etc!!!
Throw them into a container and draw 100 times throwing the drawn marble back each time, shake the container and draw again till 100 draws have been done. Write down the outcome of each draw and see what happened after 100 draws. That will give you the idea of how your system will do over 100 trades. I use this method when doing my Stock trading classes to show people the effect of random but with odds built in better then 50:50 according to the strategies that I use.
Do that for 500 times and work out your max drawdown, your max loss, max gain, winner/losers in a row etc!!!!.
A drawdown is measured from the time a retrenchment begins to when a new high is reached. This method is used because a valley can't be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the smallest trough is recorded.
Drawdowns help determine an investment's financial risk.
This will give you an idea of how your strategy will do.
Phillip
Remember to have your entry reasons, your exit reasons written down. All 100 Trades in backtesting MUST be done according to the rules you have specified.
1. White for BE (The number of marbles painted according the number of times BE has occured)
2. Dark green for +40 (The number of marbles painted according the number of times +40 has occured)
3. Light green for +60
4. Blue for +80
5. Light blue for +120
6. Brown for +160
7. Light brown for +200
8. Yellow for +280 Etc!!! etc!!! etc!!!
Throw them into a container and draw 100 times throwing the drawn marble back each time, shake the container and draw again till 100 draws have been done. Write down the outcome of each draw and see what happened after 100 draws. That will give you the idea of how your system will do over 100 trades. I use this method when doing my Stock trading classes to show people the effect of random but with odds built in better then 50:50 according to the strategies that I use.
Do that for 500 times and work out your max drawdown, your max loss, max gain, winner/losers in a row etc!!!!.
A drawdown is measured from the time a retrenchment begins to when a new high is reached. This method is used because a valley can't be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the smallest trough is recorded.
Drawdowns help determine an investment's financial risk.
This will give you an idea of how your strategy will do.
Phillip
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