Hi guys.
I turn strategies into EAs, backtest them, forward test them for a couple of months and if they work, run them live.
My main question, something I haven’t been able to find much info on, is how do you know when to stop trading a strategy? I suppose breaking drawdown high watermark is one way, but that seems a bit blunt to me.
Any ideas or resources?
Cheers,
Hi,
If you have enough data from backtesting, you could try to calculate the average movement that causes reversal in the most of the cases. There is a general rule, that pullback (correction) should not exceed 1/3 of the entire movement, and if the price moves further, this could be the reversal. In such case, you can try to reate something like trailing stop that would calculate the average pullback size for the particluar instrument that you are trading, and then it would place the stop according to that calculation. The average bullback would also depend on the timeframe.