Use Backtesting for MM ...

Hi,

I think that money management is one of the most important part in trading.

As I use EA's for trading is money management very easy to implement.

I have backtested my ea and the result is.
Max wins in row : 5 average = 2
Max losses in row : 9. average = 3

So I was thinking that if wins > 4 I will trade a small lot next time ( Or not trade )
and
If losses > 3 and < 8 I will decrease my lots.

Anyone doing such MM ?

Please comment the idea.

How do you know your backtest is accurate and your EA robust?

I have trade with my EA live since sept-2007 with no changes and my backtesting is giving me the same trades as my live trades.

So now I try to creates a better EA. The current EA will still be used in // with the new one.

average 3-4 trades / month

So I think my EA is ok and my backtesting is also ok.

Maybe I miss something

Doesn't look like it. Most people talking about their EAs only backtest them, not forward or live-trade them.

As for your MM suggestion: I don't see why it won't work.

I will test this idea and post the result

Happy trade !

The result is not better with this method. or :/ or

Having expectations is important when it comes to developing a forex strategy that really works. Expectations force you to define a plan in advance. The whole process of forex back testing revolves around the notion of proving and validating your ideas. However, the first thing you have to do is put those ideas and expectations into a plan. You should always have a clear idea of the trading interval that you want to use, the relative risk of the methodology employed, and the percentage of profitable trades.

Hi,

I agree, good money mangement is vital if you want to trade profitably.

However, my basic thinking is that you risk the same (small!) % of your account on each and every trade. I can never know in advance whether a particular trade is going to be a winner or a loser but that's not my job in trading: it's about treating each trade equally and equalising risk so I come out on top eventually if my method has a positive edge.

If you depart from this you are then subjectively ranking trades and it can only be worth doing this if you can clearly demonstrate your ranking adds to the bottom line. You'll have to be able to consistently see that your trades are not independent but somehow linked and dependent on each other. This is not the norm in trading. You also run the risk of tying yourself in emotional knots as it is almost inevitable that down the road that you'll reduce size on some winners and increase size for some losers.

Unless you are 100% certain your non-equal treatment of trades improves overall profitability I'd just stick to taking them at all the same size and work on improving your entry criteria and/or trade management instead: cut the losers shorter and run the winners longer - that's pretty good money management!.