This is the question that one of my friends asked me so instead of answering it right away, from my 10+ experience, I decided to find some of the most popular strategies on forex forums and backtest them to see how profitable they are — because obviously, I haven’t tested most of those strategies so my answer may not be solid.
I created the same thread in another forex forum and asked people to suggest some popular strategies on that forum, however, since I’ve been a member for a long time there, I had some of them in my mind.
I didn’t know what the exact section is to open this thread here so I chose Trade Journals so let me know if there is a better place for this topic.
Anyway, I tested one popular strategy and I’ll show you the results in the next posts.
In the meantime, if you know a popular strategy on babypips, post it here so I’ll backtest it to see how it performs.
By the way, I’m talking about the strategies that haven’t been programmed and don’t have EAs. I’m talking about manual backtesting using some simulators made for this purpose such as fxblue free backtesting simulator, because I don’t think there’s any popular programmed strategis for free here, I’ll be happy to see one though.
The strategy that I backtested is related to trading made simple thread on FF. The thread has been around since 2011 and has more than 5000 posts so generally that can be a good pick.
I backtested the strategy for 3 separate years, 2013, 2017 and 2020
That didn’t go well and I lost money in every one of those years.
I explained the strategy along with the entire process of backtesting in the following video. After taking lots of positions in this strategy and seeing the different angles of it for 3 years, I found the weakness of it too. I made some suggestions in the video that might improve the strategy.
For the next strategy, I’m going to backtest another topic from the FF which is hot nowadays. The thread called Roadmap by LauraT.
There are several indicators in the system but the base of strategy is on moving averages. basically, you detect the bias of the market by a simple moving average with the period of 200 and enter the market when the price enters a channel made of two EMAs 8, high and low.
Anyway, you can read the topic if you want to know more, however, I’ll explain that in the next video along with the results of the backtests.
I backtested the Roadmap strategy on 3 separate occasions. In the first 2, the account suffered losses, however, I changed some parameters and tested again.
Well, this time the changes worked and the strategy made a profit.
Two mechanical strategies you could be interested in automating include Robopip’s Inside Bar Momentum Strategy and TTC’s EMA cross above strategy. Robopip’s strategy has been backtested before and we are not getting the results he claims.
This is the video of the second strategy. You can skip most of it, as the strategy boils down to this:
Buy when price closes above the 20EMA - call it the setup candle. The trigger candle is a candle that closes above the high of the setup candle. The trigger has to come right after the setup.
Actually, nevermind. I’ve watched your video: the way in which you backtest is not valid. You can’t say “I am going to use a 1 lot position to keep things simple”. This makes no sense. In your video, you reduced the size of your stop loss to reduce your average loss… which is not how position sizing works. You determine your stop loss in pips, and then calculate a position size according to how large the stop loss is. In other words, regardless of the size of the stop loss, the percentage loss you’re going to take if it gets hit remains the same. If you take a fixed lot size approach to a strategy based on a percentage position size, your results will not reflect the actual performance of the strategy.
You can consider 1 lot per position as a new rule of the strategy not the initial MM rule. It’s not incorrect! why? because first I don’t compare my result to other results that someone might get from this strategy and second I’m using only one pair, eur/usd, so it doesn’t matter if I use pip or money for position sizing. What you say about position sizing is correct when I use for example eurusd with the pip value of $10, gbpjpy with the pip value of $9.3 and etc.
Plus, I didn’t change the size of stoploss, please watch the video again, I changed the exit method of the strategy.
By the way thank you for the suggestion. If I backtest that, I will definitely use the 1% that he’s mentioned in the video because here I want to compare my result to his.
If you want to see if strategy is profitable or not, try it first on demo account. In this way you will be able to see if you can make money on it, or not
I backtested the strategy that @anon46626828 introduced. I followed the exact rules as the person in the video, Steven, mentions including his money management.
I also did the backtesting within the same time period as Steven did so that I can compare my results with his. Moreover, I set a 3 pip spread for GBP/USD, the same pair that Steven had backtested. I used Myfxbook for finding the average spread of GBP/USD, 3 pips, among forex brokers. Your broker may offer higher or lower.
Steven in the video, claims that you can earn 20% after 6 months for each pair that you trade, according to his backtesting results. It means you can gain more than 1000% if you trade 28 major and minor forex pairs.
Well, we all know this claim is not true. You don’t even need to backtest to figure it out but I decided to put my money where my mouth is and backtest the strategy.
Not only the account didn’t make any profit but it suffered a loss of around 13%, no wonder!
For the next backtesting, I picked another trading strategy from a youtube channel. I was browsing youtube when I came across a video doing what I do nowadays, backtesting.
At first, I got excited because the channel has plenty of videos related to backtesting different strategies. Well, that might lift a burden from my shoulders and make my life easier
There could be several backtests showing the results of some strategies, that would be great!
After watching the video, I changed my mind. The video is a total non-sense which tries to show trading way easier than it really is. Well, giving people a potion that simply makes them rich overnight works all the time and attracts lots of viewers.
Anyway I backtested the strategy and this is the result on fxblue:
I like your latest videos a lot more. If you include the percentage risk in the backtest as you did, results will be more realistic in my opinion. Are you still looking for strategies to automated? You could have a look at this one on reddit: link.
I’ll summarize it for you.
Parameters
EUR/USD (M15)
50 EMA
MACD (Defaut settings)
Risk Management
2% risk per trade
2:1 risk/reward ratio
Stop loss is determined in the contents below
Long Criteria
Price is above 50 EMA.
MACD and its signal line is below 0 (signal line can touch 0 and be valid).
Enter on the next candle that causes the MACD to cross the signal line upwards.
Stop loss is set to slightly below the swing low of the MACD cycle that crossed over (including pins).
Short Criteria
Price is below 50 EMA.
MACD and its signal line is above 0 (signal line can touch 0 and be valid).
Enter on the next candle that causes the MACD to cross the signal line downwards.
Stop loss is set to slightly above the swing high of the MACD cycle that crossed over (including pins).
Thanks Albenor for the suggestion. I have a lot on my plate nowadays but I’ll backtest that when I find free time.
By the way, I’m pretty sure that strategy isn’t profitable, at least in the long term. I backtested over 100 strategies around 10 years ago and I can say the strategies that are based on indicators with static periods are doomed to failure unless we find their weakness and stop trading in those situations or change some parameters.
That’s why such strategies don’t make any profit in general when they are coded but their developers or the people who are successful to optimize them can make profits by them. They know when to turn off their EAs.
To check how fruitful is your current planned strategy the best way is to test it on a demo account. And if executed well, yes strategies do prove to be profitable.
I dont’ think you will find profitable strategies but a serious backtest should cover at least 2 years.
Few months tell nothing, there are no strategies that make money every month.
