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May 31

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Monday 31st May 2010 : Backtesting and Analysis 2

I have spent the last week backtesting my strategy. I want to find out more about the personality of my strategy but more importantly how can I best implement the strategy to make me consistently profitable. I have been doing OK, but I am just keeping my head above water and not really making profits month after month.

I found a neat little program (Forex Tester 2)  for about $100 that allows me to upload data for any major currency pair back to 2001. Once uploaded I can set up the date period I want to teat and then Start testing. As I am not  code whizz and that I am not sure that my strategy can be coded I manually went thru 6 months of data from 1st Oct 2009 to march 31st 2010. What I like about the app is that you “play” the data as though it was the real market, although you can speed it up or slow it down and pause.

Well it took me 3 days to simulate trading for 6 months from 06:00 -> 17:00 UK time. After exporting the trading summary to excel and doing a little more analysis I was really interested in my results.

Basically the way I implemented my strategy was just 30% Profitable, 31% Breakeven and 38% were losing trades. That said the account “grew” by 100% in 6 months. Of course what was not taken into account is that a) I do not want to be sitting at the PC for 11hrs a day and b)This was simulation! The % performance figures are pretty much what I have seen trading the strategy live but for 2 big differences :

1) I am not letting my profits run to the big +5% days

2) I am not taking enough BE trades

So I am now looking deeply at the 300 trades on the simulator and seeing how can optimise my Stop Loss, Break Even and Exit tactics to turn some of the Breakevens into profit, some of the losers into BE without reducing the opportunity of the big winners. Additionally, I want to see what times of the day are most profitable. e.g of the 26 2% trades, only 2 were traded before 8am UK time…..the 3 big +100pip runs were all after the US joined the party.

Should have done this months ago……..think I will be doing this for the rest of the week.

Happy Trading

Jimmy

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