Hi folks, I’ve been backtesting my strategy on ForexTester3 trying to see if it works and get some practice charting. Here are some of the issues I’ve seen so far - if anyone has any tips to tweak it then fire away!
Before I go into the issues, here’s what I’m basically doing:
- Plotting major S/R on weekly charts
- Switching to daily, checking S/R levels
- trading pullbacks on trends (when they end and the trend continues), looking for either a 2-bar reversal, engulfing candlestick or pin bar then a candlestick in the right direction to confirm before entry
- Range trading on 24H chart based on weekly S/R lines, waiting for price to bounce from a level (with the same signals as above) with another candlestick in the right direction to confirm
I think that covers my basic strategy. I haven’t lost money in the test so far, but there’s about 11% profit over a 2-year period so far which doesn’t seem like enough return unless I find 100 grand under a rock any time soon. So here we go - these are the issues I’ve noticed so far.
- Trend spotting is hard.
I’ve had some great success on long-term trends, but once they go into a consolidation period I’m finding it almost impossible to find any new trends emerging. When is a trend a trend? The school of pipsology method of 3 higher highs/lower lows seems to never happen before it reverses again, and waiting for this to happen on the daily timeframe can result in no trades for months at a time from all that pesky ranging, meaning no profits.
- Range trading is also hard.
Sometimes the range is easy to spot and using the 3 candlestick patterns I listed I can make a few pips, but a lot of time the range won’t stay even. It’ll tighten, it’ll widen, it’ll break out for a minute then change its mind. Having a plan for these is tricky…
- Waiting for trades is (you guessed it) hard.
I’m waiting for things to happen a lot. I’m pretty sure this is why I’m not generating much profit - there’s something missing. You’re midway between 2 S/R levels, waiting for a level to approach so you can trade the bounceback. Then the price goes the other way for a bit. Then the other way. Then… you get it. It can become too tight a range to trade on the 24h chart, so should I look at lower timescales when this happens? 4h chart maybe?
Anyway, if you’re still reading at the end of this post then thanks for your time. Any critisism welcome - tear it apart, go for it. Be nice though - I’m only a newbie