New backtesting question!

Trading Discussion Risk Management Practices
1

So I’ve developed an intraday system using EMA, MACD, Stochastics and RSI. Entering long when price trading above EMA, with the MACD histrogram above 0 and both RSI and Stoch lines above 50. Vice versa when going short. I use S&R lines as take profits.

I set up manual backtesting on MTA5 and using the pair GBP/USD. Using hourly charts. I imagined started with £3000 in my account, and only risk 2% each trade (£60 with my TP always being double) - thus I could maintain a 50% winning percentage and be profitable.

I started manually backtesting and it seems with my first 13 trades, I have a winning % of 70 (won 9) have made 388 pips and £843.47 in profits!

Now I know this is unrealistic, if not impossible! I’m using babypips position and pip value calculators and I think I may be using crazy amounts of leverage unintentionally - eg if I had spotted an entry signal where my take profit would 20 pips away - would I have enough funds in my account to go for aim for 4% (£120) in profit?

This is my first backtesting attempt so I would like to get this cleared up before I continue - its very time-consuming!!

Many thanks

1 Like
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Hi Tomhm98

Personally I think backtesting is a total waste of time. Yes it can give you an idea but seriously who knows what economic conditions were driving the market at that point in time. The real teacher is real time charts as it is important to get en eye and understanding of price action in the here and now. Who cares what happened in the past. You cannot make money trading the past.

Having said that I do have Forex Tester and I use that when the markets are closed to practise and hone my skills. I also keep a very detailed log of all trades and frequently review those past trades both winners and losers to ensure that I have an understanding of what I did right and what I did wrong.

I also highly recommend a good spreadsheet to keep an accurate account of profit and loss and that spreadsheet also has a comments section to make notes on each trade.

Good Luck

Cheers
Blackduck