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Author Topic: How long to keep your strategy running before you decide is not working anymore  (Read 11990 times)

Offline bruce_knee

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If my strategy fails me 5-6 times in a row I start analysing it. I'm a scalper so I can't always expect positive results from my strat as with short time frames prices are more volatile. I also follow the economic news to be in check with what's driving market sentiment

Offline diamond

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Its simple if you account equity comes to 50% loss, then you should stop trading using that strategy.

Online diyforexskills

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Quote from: diamond date=1457863052 link=msg=353295

Its simple if you account equity comes to 50% loss, then you should stop trading using that strategy.


Or just switch the strategy to a demo account (probably better to do that at 20% DD), keep trading it on demo till the market reverts to being favorable for that strategy again, as indicated by an uptrend in the strategy's equity curve, and then start trading that strategy on live again. And so on... And use the "on" time to develop your next strategy so that over time you will have a strategy to suit each market condition period.

The market is dynamic so we must be fleet-footed and be equipped to mirror that dynamism.
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Offline iMusingKiMi

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Quote from: diamond link=msg=353295 date=1457863052

Its simple if you account equity comes to 50% loss, then you should stop trading using that strategy.


50% I thinks is a bit much to put on this figures on risk of investment. This exposure could anytime broke you easily.

Offline Forex Verified

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You might try to lower risk if the strategy keeps failing, or move to demo for a while.
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Offline Steveperry

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The main flaw is only relying on the results of a 'backtesting' , there is much more to it and simulation is also key to understand how the strategy will perform in different market conditions

Offline brave

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Forex is risky and tough business and we should not wait long time if trade goes against. We should accept the small loss and should close our trading, after getting rest we should re-entered in the market with best planning in order to get the fruitful result.

Offline resistance

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Backtesting in demo account maybe any trader they can good result and small drawdown, but sometime in real account any trader they can work using strategy in dmeo account because different psychology,

Offline Forex Verified

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Quote from: resistance link=msg=353568 date=1458827704

Backtesting in demo account maybe any trader they can good result and small drawdown, but sometime in real account any trader they can work using strategy in dmeo account because different psychology,


That is why after backtesting you go to forward testing with minimal risk.
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Offline indicator

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When you get too much of draw down and your account capital comes to a stage where you start worrying then you should stop trading on that strategy.

Offline iMusingKiMi

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Why a lot of people only take backtest as reference instead of true results? Many people thought that backtest is useful, but actually backtest varies at least 20% when you trade live.

Online diyforexskills

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Quote from: indicator date=1463379546 link=msg=354799

When you get too much of draw down and your account capital comes to a stage where you start worrying then you should stop trading on that strategy.


Yes, but then you also need to know when it is safe to re-enter with the strategy.

My suggestion is to adopt a Dual System of trading, which I describe on p8 of the User Guide for FX Autotrader Elite

http://www.fxautotraderelite.com/wp-content/uploads/2014/10/User-Guide-for-FX-Autotrader-Elite-Trading-Tips.doc-V-03-01.37.pdf
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Offline Forex Verified

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Quote from: iMusingKiMi link=msg=354832 date=1463463828

Why a lot of people only take backtest as reference instead of true results? Many people thought that backtest is useful, but actually backtest varies at least 20% when you trade live.


It's true, backtest can give you an idea or a direction of a certain strategy but the truth is - forward trading is always different (and market conditions constantly change).
If it's not verified, don't buy it - www.forexverified.com

Offline Aaronpp

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The moment your strategy fails more than five times in a row is because you have to change it, maybe not drastically just analyze the bugs youve had and subtly change your strategy but you can do this any more if youve performed your previous analysis perfectly because the strategy is probably good but Your analysis fails and is what causes you losses, You must be very careful with that.

Offline FxTS

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Actually, it depends on particular strategy. In general, trader should pay attention for the situation when the strategy starts to perform worse than it performed during backtesting and demo testing. There are not strict rules like "five losing trades in a row" because strategy could make even more losing trades in a row and still be profitable due to the risk-reward ratio. For example, most of the mid-term strategies has poor win rate, but they are profitable because their profit potential is extremely high. Some of them offer 1:15 or even 1:20 risk-reward, so you can have even net losing trades in a row and still be profitable.
To be able to detect actual underperformance trader needs to have a detailed report on the performance of the strategy on historical data to compare with. This will help trader to understand that something goes wrong and make changes that are necessary to make the strategy profitable again.
Markets incur changes for all the time, so the trader has to be flexible enough to be able to stay profitable under any trading conditions. If the trader would be open minded, he would easily find the solution on the way to use new trading opportuntities.
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