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📕Low-Quality setups (UNCLEAR) VS High quality (CLEAR) setups📕High quality (Clear) vs Low Quality (Unclear, wicky, random, guessing) Setups in Our Trading High quality clear (HQC) setups are best representations of your EDGE, they allow you to feel confident in the MOMENT of placing a trade, and you can feel relatively good about it even if it’s a loser, because you know you traded in clear market environment and did your best HQC setups bring you HEALTHY excitement and joy from the process of your trading, in case of a winner, usually not leading to overconfidence and doesn’t lead to attachment to random reward, and in case of a loser - you are not dragged into revenge or depression, because you know losers are also part of your strategy and your execution was good When you enter HQC setups that speaks about you as about a trader you tested their strategy, who knows what they want to see in the market and applied effort to stay away from bad condition and wait for a better one. These skills alone are so much better than 1 random +3R or +5R winner Low quality unclear (LQU) setups mean something is out of your mental game today, you feel not feel good in longterm perspective trading them, because you kind of KNOW you should trade them, but you still do. It all sucks you into an emotional circle. LQU setups bring you UNHEALTHY , short term lived overexcitement in case of a winner, attaching you to random rewards, which is fatal for a trader. Every time entering a LQU setup you develop a habit or “teach” yourself that it is easy and fast way of earning money. Just see something distantly reminding about your setup and enter. Sometimes you’ll get away, but longterm you’ll lose more. LQU setups means you are you fully confident in your core strategy, and so you may unconsciously search for random entries, because you entered like this before and it brought you reward. Trading LQU setups is destroying your mental game and account in the short, medium and longterm Picture attribution Frame Border PNGs by Vecteezy
OANDA:XAUUSDEducation
by Yelli_trades
3
Microstructural phenomenons: pre-testOn the chart, Oct '94 is a pre-test of 92.26 I'm not sure it's a good example here, but it'll suffice to explain this easy concept. Again, it's not the system's behavior principle, the reason of this microstructural phenomenon is all of us. Forgot to mention before... There's no such thing as, "A new wave started after "almost" hitting a level". NO. In 100% cases, a level should always be touched. because cheap/expansive is always 1 tick past the level, the main responsive activity will be concentrated after the level, never before. However, some of us sometimes gets a lil heavy handed in scaling in/scaling out of the previously acquired position. That's why prices start to react (sometimes quite strong) in front of the level. The main things to learn from here: 1) Pre-tests are not the systemic events, if you're responding at a level / a lil deeper past the level, nothing had changed for you at this points; 2) If you started to scale in before the level and got caught in a pre-test, just simply close your position with whatever revenue this pre-test offers a lil bit later and start scaling in again like nothing happened; Caution: pre-tests are also a part of the recorded market activity as everything else, during which the things may change or may not change. Pre-tests should be taken out of the context and be processed as independent entities.
GEducation
by gorx1
STEP 1 to MASTER TRADING: Hindsight trading. Train your eyes.A common mistake that traders make after learning any kind of trading setup is jumping into backtesting using a replay tool, or even live trading. However, if you think about it, trading is very much about pattern recognition. And when you force yourself into live trading without a proper understanding of what your patterns look like, most likely you’ll need much more time to succeed. A different approach and much more effective would be using hindsight, that’s when you see what actually happened. During this process, try to find at least 50 high-quality setups, that represent your trading system. So you actually see everything that happened and find situations, where your edge played out, document it in your journal. That’s great training for your eyes and brain. You don’t need to guess, you will not feel anything, because you already see what happened, you’ll notice that sometimes your edge, your system doesn’t give you entries and price goes without you, sometimes, you’ll see a loser or a breakeven after your entry, start to get used to this, as it’s all part of your system. After that, you'll have a much better understanding and vision for your setup - and that could be the time to try some backtesting and forwardtesting. I’ll talk more about a different kind of backtesting in future posts. Meanwhile, take care, send your questions, and comments, will be glad to chat with you. Dima
Education
by Yelli_trades
1
The basics of back-testing (HOW TO)Hey Traders, Today I wanted to follow on from the fantastic amount of comments that we are receiving from the previous video, "stop strategy jumping." It seems that so many of you took a whole heap of value from that video and for that I am very thankful and to everyone who reached out and told their story or let me know that it really touched them. As highly requested, I wanted to run through a basic way to start getting the grips with strategy back-testing. How can we go about back-testing our strategies to ensure that they are profitable for us in the long run? Take a look, have a listen and tune in. Set up an excel sheet the way I do and get back testing. There's only one way to do this, and it is to do the hard work. Let me know what you guys find. I can go more in depth in the future, but for now. It seems like most people wanted to get to grips with the absolute basics, which is what I'm going to show you today. If you have any questions at all, please the comment section is the place to be. As always, have a fantastic trading week and a fantastic weekend traders. I'll see you very soon.
Education
by the5erstrading
12
How to Backtest a Trading StrategyBacktesting is a manual or systematic method of determining whether a trading strategy or trading setup has been profitable in the past. A trader should backtest a strategy to help determine if a trading strategy is likely a waste of time and money, or if it shows promise and profitability in a variety of markets. While you can get software that does systematic backtesting… we prefer manual backtesting as it can be carried out by any type of trader, It is a key component in developing an effective trading strategy. There are infinite possibilities for strategies, and any slight alteration will change the results. This is why backtesting is important, as it shows whether certain parameters will work better than others. What Do I Backtest?
The first thing to note is that you don’t need a full trading strategy in order to start backtesting. 

For example I personally am always looking at new trading setups and candlestick formation and then backtesting them to see how effective they are. 

You can test small parts of a trading strategy before putting them all together. 

And of course you can and SHOULD backtest your whole trading strategy in a number of different trading situations. 

How to Backtest

 1) You need data to use in testing… if you are testing short term strategies on small timeframes then use at least a few weeks of trading data.

If you are using higher timeframes then you should be using years of trading data.

 2. Define the strategy parameters. Entry conditions, exit conditions etc. Include as many “If X happens then I will do Y” scenarios as possible so that your strategy is repeatable. 

Its essential to include risk management in these parameters too. So decide on if you are risking a percentage of your account equally on each trade, what is that percentage. If you are managing your risk in another method, clearly define it as something you are able to measure. 

ALL OF THESE PARAMETERS ARE WHAT YOU ARE MEASURING AND TESTING. THESE ARE THE ELEMENTS THAT YOU CAN CHANGE TO SEE WHICH ARE MORE OR LESS PROFITABLE. 3. Use the TradingView rewind tool to go back in time and remove the predictive nature of knowing where the chart will be headed. 

You could go back in time and look for trades from a year, a month or a week in the past, depending on how far back you wish to look. 4. Analyse price charts for entry and exit signals. This can be done until all trades on the chart up to the current time have been located and marked or written down

(be aware that it can take some time and be prepared that you are unlikely to be able to do all of this backtesting in one session… it could take you a few sessions of backtesting and recording the trade outcomes to fully test a strategy.) 5. Once you have competed this process, then you can start to total all of the trade results up to see how profitable or unprofitable your trading strategy / setup has been over time. What Goes Wrong in Backtesting

Typically the pitfalls and the ways that people fail at backtesting are based around not being through enough. 

That could mean that people haven’t included enough data in the backtest. 

It could mean that they left too many unknowns in the strategy so when using it in a live trading situation the strategy isn’t usable or realistic.

Also it could be that people don’t back test for long enough to see if the strategy is profitable or not. If you only have a small sample size of trade then even a short losing or winning streak of trades would dramatically affect the results. You need enough trades to show winning streaks, losing streaks and all between so that you can be confident that your strategy will be able to withstand those situations in live trading. 

Imagine for example in your backtesting your strategy didn’t lose more than 2 trades in a row but when you start using it in live trading you get 5 losses in a row. This is a situation that hasn’t been tested so could show a different result. 

The goal is to backtest for long enough and through enough so that nothing in live trading hasn’t been tested previously. While it may not be possible to fully achieve this… it should be the goal and you should feel confident enough that you have done everything possible to ensure this is the case.
Editors' picks
Education
by JoelWarby
56
HOW-TO: Backtest Your Forex Strategy & Increase Your Win-RateIn my earlier article, " Proving Your Trading System with Backtesting ", I demonstrated how, in the Futures market, you could backtest your trading system, see what works and what doesn't, change your variables, and rinse & repeat until you have a winning trading formula. You GET this winning formula by torture-testing (ahem, *back*testing) your system under every market condition. My last video backtested Futures as an example and I received dozens of requests to demonstrate and develop a similar system using Forex, so here it is! This video will show you HOW you can backtest your own Forex Trading system over time, determine its results, and refine it until it is bulletproof (or marketproof!). All you need is a Trading System, a Spreadsheet, and a great trading platform (ahem, like TradingView) :-) Trading can be the most rewarding of careers, but only after putting in the hours of hard work. And like everything else in life, if you don't put in the work, you won't get the results. And if you put in the work AHEAD of time, you won't have to put a DIME of your hard-earned capital into the market until you are CONFIDENT that your system will multiply that money in your account rather than feed the market monster. I hope you enjoy the video... but more importantly I hope it will help you become a better trader. If this was beneficial to you please feel free to leave a like, a follow, or a comment... I'd love to hear from you and stay in touch as we all move forward in our trading journeys! Trade hard, and trade well! -Anthony
Education
by ocaptain
29
Backtesting Part 2: Testing Your Trading System in 3 Easy StepsIn my earlier article, " Proving Your Trading System with Backtesting ", I outlined the HOWs and WHYs of backtesting. Does your trading system work under all conditions? Under what conditions might it *not* work? Can you remove those instances from your plan? Under what conditions might you *improve* your win rate? In another article, " The Unexamined Trader ", Just as an unexamined life is not worth living, the unexamined trader should not be trading a system that has not been tested under every market condition (and I mean TORTURE tested under HUNDREDS of trades). This video will show you HOW you can backtest your own system over time, determine its results, and refine it until it is bulletproof (or marketproof!). All you need is a Trading System, a Spreadsheet, and a great trading platform (ahem, like TradingView) :-) It will take some time and effort, but like everything else in life, if you don't put in the work, you won't get the results. And if you put in the work, you won't have to put a DIME of your precious capital into the market until you are CONFIDENT that your system will multiply that money in your account rather than feed the market monster. I hope you enjoy the video... but more importantly I hope it will help you become a better trader. If this was beneficial to you please feel free to leave a like, a follow, or a comment... I'd love to hear from you and stay in touch as we all move forward in our trading journeys! Trade hard, and trade well! -Anthony
Editors' picks
CME_MINI:ES1!Education
by ocaptain
171
Proving Your Trading System with BacktestingWouldn’t it be great to see the future? To see where turning points in price will occur with a high degree of accuracy? To see if a trading system that you developed or bought or learned actually works? Well, you can, with a method called BACKTESTING.  Backtesting performs three important functions: 1: It helps you IDENTIFY the reliability / win rate of your trading system over time. 2: It helps develop and reinforce the muscle memory you need to EXECUTE opportunities in your trading strategy 3: It helps you continually REFINE / improve your strategy as you observe it work against price action, ultimately increasing your "hit rate" as a professional trader. The first requirement of a trading system is that it works via RULES. There are no 'hunches' in the market... the market has *specific* behavior patterns and our job as traders is to recognize those patterns and *capitalize* on them. Backtesting has three important requirements: The first requirement is that your trading platform supports backtesting. Can you go back "x" amount of time and look at the timeframe(s) you need to make the decisions you would have made if you were "in the moment" in an efficient manner in order for you to simulate hundreds of trade setups? The second requirement is that *you* are willing to put the energy and work into testing your trading system within an inch of its life before you risk a single penny of your trading capital. You need to know WHEN the system works, WHERE the system fails, and WHY the system worked and failed when it did, and that takes hundreds (if not thousands!) of simulated trades to do so. As you are observing the system in action you will begin to "see" the patterns in a new light. It will become more and more intuitive and you will find opportunities to 'tweak' the system as you go along. You will identify patterns when trades fail and stop trading that pattern. You will see opportunities that got away and you can 'tweak' your system to take advantage of those opportunities. Most importantly, you will see whether the system even works reliably at all and ditch it if it doesn't. It may be frustrating to decide to do so, but the good news is you will not have lost a single penny trading a faulty system to begin with! TRACKING YOUR TRADING SYSTEM To track the accuracy of your trading system you will need to setup a spreadsheet that will record the important variables you want to track. For example, you may want to include the headers, Asset / Date / Time In / Time Out / Long or Short / Reward to Risk Ratio / Gain or Loss / Account Balance The "Reward to Risk Ratio" column is the most important. If you read my previous column, "Trade Like a Pirate" ... ... I discuss that you need to think in terms of Percent Risk per trade ("R") and not Dollars. This will show you how well your strategy works. For Example, if after tracking 100 trades you find out that your system has a 33% success rate, your account will grow by 1% for every three trades if you follow a minimum 3:1 Reward to Risk Ratio (3 -1 -1 = +1). If you find on average 6 trades per day, your account can potentially grow by 2% per day. Under the "Account Balance" column, if you add the trade's win/loss to your previous account balance you can determine how long it would take to get 'x' amount of money from where you started (or how long it will take and inferior system to lose it all as well!) Testing your trading system also shows you how many opportunities present themselves per day / per hour and when the best time is to go 'fishing' for trades. Backtesting might tell you that you need to wake up 2 hours earlier (and go to bed 2 hours earlier) if you want to achieve the goal of replacing your car in 6 months. Or fire your boss in 24 months. Or pay off the mortgage in 3 years. Having a plan to *make* money should also include your plans on how and when you want to *spend* that money - how you will 'pay yourself'. Socrates famously said “The unexamined life is not worth living.” Likewise the unexamined trading system is not worth putting your hard earned money into. The more you backtest your system, the more you will gain (or lose) confidence in the system which will ultimately determine the actions you will take. Another happy by-product is that not only will you be able to refine your trading system, but you yourself will be continually refined in the fire of the market, exercising your mental muscles looking for opportunities that meet your particular trading system. For instance, by analyzing all my losing trades in my first batch of 100, I was able to identity a pattern in the formations common to all failing trades but not winning trades. I then modified my trading system to exclude trades which showed that pattern, increasing my success rate by 30% in the next 100 trades I tested with the new system. Not happy with that, I went through my losing trades from Round 2 and found another common pattern among them. Eliminating those, I modified my system and increased my success rate by yet another 20%. Finding what works is often a product of finding out what doesn't work, and just stop doing that! If you need advice on how to stop a bad habit, just listen to Bob Newhart: www.youtube.com Finally, just as any athlete will you tell you that you should "Warm Up" before performing any strenuous exercise, one thing my backtesting system has taught me is that I need to spend the first 30 minutes of my trading day "warming up" by finding all the opportunities that presented themselves in the Futures market during the overnight session and log them in my spreadsheet. Likewise at the end of the day I look at all opportunities I might have missed so I can reduce the likelihood of missing them again. The original title of this article was "Backtesting to the Future" which reflected this habit: by 'warming up' before actually trading I got my mind prepared to "see the opportunities" for the future day ahead, and I identified these patterns a lot better than I would have if I entered the pool cold and experienced the 'cramp' of a losing trade. Admittedly, backtesting a highly visual concept, so I will be following up this article with a video showing an example of my backtesting strategy and how you can model my system to meet the needs of *your* system. As I love to say, "Good artists copy, great artists steal." Likewise, "Good traders copy... Great traders steal." I hope you can steal some of these ideas and have them help improve your trading game! Share your thoughts and success below! As always, I'd love to hear if this has helped you become more confident and profitable in your trading. Like and Follow if you haven't already and you will be alerted to when I post the followup video! Trade hard and trade well!
Editors' picks
Education
by ocaptain
105