Hello All,
I have been manually back-testing on 4 Hour charts of Engulfing bars and morning/evening stars in the direction of current major trend. I have backtested 20-25 charts for couple of years. I am consistently getting 65-70% winning results with risk:reward of 1:1. Is this winning percentage with 1:1 sufficent to start trading successfully. I have seen people claiming 80-90%, but have never touched 90%, with rare occations of 80%. But in most of the cases my backtesting gives me 65-70% winning result. Should I start trading live with these results?
I would say go for it. It sounds enough to make money if you are able to strictly follow your plan and if you didn’t unconsciously trick yourself. This can happen with the back testing.
Also did you try demo trading it for a couple of months?
You can also jump to live trading if you have already experience with Demo and trading. But remember that live trading is a totally different animal. Start with a small account. Even 50$ if you don’t have much to risk at the moment.
Thank you Trasimaco
I have only back-tested. Now if here people say that this winning percentage is sufficent to make money I will go for demo. Yes, you are correct sometimes we MOULD the results for what we want during backtesting. But trading live would be complete new world.
[QUOTE=“Maira;491583”]Hello All,
I have been manually back-testing on 4 Hour charts of Engulfing bars and morning/evening stars in the direction of current major trend. I have backtested 20-25 charts for couple of years. I am consistently getting 65-70% winning results with risk:reward of 1:1. Is this winning percentage with 1:1 sufficent to start trading successfully. I have seen people claiming 80-90%, but have never touched 90%, with rare occations of 80%. But in most of the cases my backtesting gives me 65-70% winning result. Should I start trading live with these results?
Waiting for your reply.
Regards,
Maira[/QUOTE]
You’re trading a 1:1 risk/reward & obviously as long as you are winning more than 50% of your trades then the system is profitable. With a success rate of 65-70%, this is definitely enough to forward test it, either give it a go on a demo account or try it with a small ($100) live account.
Assuming that your system works, you can follow the plan & deal with the psychology of trading live then you should be making mon£y.
Good luck with it & update us with how you get on.
forward test is the only way to prove your strategy, as in real time you have to make the trade happen, which is far more difficult than doing a backtest.
Personally, I would aim for a higher Reward:Risk ratio. 2.0:1 and above is pretty good. If you could manage 60-70% win rate and 2:1 you’d be set. Even still, 70% and 1:1 is profitable. 80% win rate and 2.5:1 is definitely possible though
Only demo test for a couple of months and at least 100 trades and check again if you are still with that winning percent.
If thats true, live test for another couple months and 100 trades with low equity, maybe 100 usd in a nano account (where every pip is only 1 cent). If you continue with same results, then congratz! You have a winning trading!
65-70% winning results while backtesting is a good sign that says "hey you are ready to feel the real world of forex. However, you must be ready as you might not get same results with a live account.
You will never get the answers you seek in a forum based on other traders experiences. The best I can tell you all your back-testing or demo account trading will be 100% worthless when you go live. Having said that, my advice to you is that you open a micro-account and only trade micro-lots. Fund it with $100 and only trade 0.01 lots. Test your strategy and see if it works for you in a real account.
1:1 mean here is the risk and reward ratio I think and if you have more than 60% winning ration then you should start live trading and you will improve more when real money is involved but be careful about emotion thing.
All I can say is Forward test it on demo. Reason being is you have stated you trade engulfing patterns on the 4hr which depending on how you trade that can be profitable. What I didnt see is do you have a set pip amount say 30 pip sl and TP. Reason for me asking is just because you have a better than 50% win ratio and 1:1 R:R this does not guarantee you anything. Engulfing patterns can differ quite a bit from setup to setup in terms of risk. Say you win a couple trades risking 50pips, you gained 100 pips but that third trade (based off your win ratio you win 2 out of 3 roughly) that setup you risk 150 pips (as that can easily happen on the 4hr on a engulfing pattern) you are out 50 pips.
Again there are more factors that need to be known as say you risk 2% on every trade no matter how big the stop. Then yeah you could be profitable but that dont mean you will. You should but what you should and what you do can differ in the end. There are spreads to factor in, roll over and any other fees.
Overall I would say try demo till you feel comfortable with what you are doing then try a small account and add to it as go see it grow. You will be amazed how fast an account will grow when you add to it when its making money and pause the deposits when in drawdown. Good luck seems you might be on the right track.
I also agree I would look for more than 1:1. It can really pay in the end but at the same time dont do it by just taking some off the table at 1:1 and letting the rest run. Reason for this I do that a lot and if you look at my trading results that little I leave on tends to get stopped out at BE. Even though it did loose money persay you no longer have a 1:1 R:R as that little you left on did make anything. Instead shoot for 2:1. This way when you get there you can cash out 50% (or more if you like) at this level and no matter if the rest does get stopped at BE then you still walk away with at least 1:1 if not more. But if it keeps running in your favor you stand to make some serious cash by doing nothing.
Also riding the trend is good I will never say not to even though I tend to trade reversals (well not lately but thats my money maker). Be a little more aggressive when swaps are in your favor than opposed. Most will say swaps dont matter (and I agree for the most part) but they do add up over time when trading the higher timeframes.
