I have backtested a strategy across 3 forex pairs for 10 months and it is coming back with what I’m assuming are unobtainable profit numbers. At £10 a point on each pair. A total Margin requirement of £3000. Its gain after 10 months is £53,000 (+5300 pips). The largest drawdown(I believe it’s called that) was -34 pips right at the start. The running total doesn’t go negative after that.
Does this sound like a standard return? How much does a live account differ to a backtest? What else should I consider?
(So well done on having enough judgment to know that it was right to be skeptical!).
The extent to which the two differ depends on a huge range of variables including (among others) what kind of trading you’re doing, which broker is it, which platform it is, what the position-sizing is, the trading frequency, the market(s) involved, the volatility, and probably many more.
Sorry to sound unhelpful but it isn’t possible to answer this very constructively without knowing very much more than the information you’ve mentioned so far. (Maybe the previous paragraph will help a little, though.)
Sounds like a dream strategy! I dont think there is such a thing as standard return in FX trading, just depends on how good your strategy and how much capital you chuck in.
There shouldn’t be too many differences on a live account vs a demo account, except that you don’t use real money on demo.
For FX backtesting, you should probably incorporate in your calculation somewhere how many pips you are paying per transaction.
EDIT: If I was in your position, I would try to do forward testing with the strategy now. I mean test it using live data, and see how good the strategy holds.
Thanks for the reply. I can see there’s tons of variables I have yet to consider. But before I dive into all of that I was just trying to find/come up with something that profited in pips. I’m trying (and probably failing) to use the basic logic that surely just focusing on pips gained/lost is the main/most important base to the strategy? It was +2400 on USD/JPY, +1700 on EUR/USD and +1200 on GBP/USD. Surely if these are in such profit the variables won’t turn the pip profit negative? Sorry if I’m missing the point
yes such results are very possible. from the technical side demo and real trading (in small position numbers like €10/pip) are very much the same in execution and speed etc etc. no difference.
from psychological they differ a lot.
just try it out with €10.000 and see if it works.
practical experiment over theory- best approach ever! (unless you want to find out the effects of a gun bullet through your head, there pls only theory no experiments)
It depends on how many trades, and whether it’s a statistically significant number. And it depends on other stuff like the position-size as well. And especially the spreads/commissions. +1200 points doesn’t look so clever if you’re scalping for 1 pip each time, and haven’t deducted the dealing costs of 1.5 pips and/or slippage of 2 pips per trade, does it? And if it’s over a small number of trades, it may not be reliable enough and the next 5 trades might all lose?
I’m not saying I imagine all that’s so, just explaining why Charlie’s right to mention that “it depends”.
Very amusing. (At least I hope it’s meant to be amusing!! ).
ehm… no? wasnt meant to be amusing. you want to tell me you aint got 10k spare money laying around? heh… then you are definately in the very wrong industry mate
One of my best friends is a financial controller so I got him to create a spreadsheet and run the data through there. I then manually back tested it to check the spreadsheet numbers were correct .
I forgot to mention that return is with 1:100 leverage. If 1:1 I think It works out as about 10% return. Add leverage in it goes stupid percent.
Some discord I have. I don’t think so 10 months is a big deal to ensure maximal result by any specific trading strategy. Minimum 2 years needed to earn 70-85% profit if you works in a specific trading techniques. Please don’t take it personally , I have said according to me
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