Need guidance for Back testing

Beginner Questions
1

Hi All,

Hope everyone is doing well.

I have recently completed the school of pipsology. Thank you Babypips! I am new to forex, please accept my apology in advance if my questions are nonsensical.

I would like to backtest my strategies but not too sure if i am doing it right.
I am using some basic strategies like Support/Resistance, Trend line, Moving Averages and Candlestick formation. I got onto the EURUSD charts and started back testing. I would like to share that i did not use only 1 strategy for every trade. Am i suppose to test only 1 strategy, only support/resistance? I have about 17 trades so far (Jan 2017 to Apr 2018) , and my win/lost percentage is about 50%. I would like to continue back testing to have a bigger sample size but would like to know if i am doing the right thing at the moment.

An example of how i am back testing now, if price is at about support area on my D1 chart, i will wait for at least 2 candles to close away from the support area, i enter on the 3rd candle opening. My stop loss will be below support area( visual estimation) and my Take profit will be close to resistance area( visual). I came to realize that stop loss is larger than my Take profits. My risk for every trade is 1% of my account balance. Risk to reward ratio is 1: <1. I would want this to be 1:>1.

The way i enter my trade, set my SL and TP are the same for Support/Resistance, Trendline, and moving average, Wait for 2 candle confirmation, tp and sl visual estimation. Some questions i have below.

  1. Should i only use 1 method like Support and resistance for back testing? To get a sample size of 30?

  2. How to have a better way to determine TP and SL, read up about ATR, i think it will be useful to set my SL at 1 ATR below/above support/resistance area.

  3. Can someone share a simple strategy? So that i can compare it to mine and see if i am leaving out something i need to consider.

I am new and my questions might not be clear, just let me know what i need to explain better, i will try my best to do it. There is no 1 perfect way in forex trading, i am just seeking some guidance.

Thank you in advance!

2

You should use the whole strategy you use for trading. If you only use S and R then backtest just this. If you use MAs along with S&R then backtest this strategy. If you mix and match then you are a discretionary trader and you will likely not be able to backtest the profitability of each strategy unless you do the above. However if that’s the way you trade you can assess its profitability by either back testing the discretionary trading or forward testing.

Looks like you’re already looking into this so that’s good.

Theres no such thing as a simple strategy. It all depends on your personality. What’s simple for someone is quite technical for others. Also different people prefer different timeframes. You can look up the free strategies section on babypips. Might give you an idea of what people are doing:

https://forums.babypips.com/c/trading-systems

https://forums.babypips.com/c/trading-systems/free-forex-trading-systems

1 Like
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thank you @tradeforex077. the links are helpful

4

its a nice reply with lots of information from @traeforex077. may be you got your ans greatly.