I am doing a lot of backtesting at the moment.
Moving forward with my trading in 2025 I could trade with a higher win rate of around 60% with a 1:2.2 R and say 180% profit
Or
50% win rate with a 1:2.65 R and 200% profit.
Which would you go for?
For me I think I am going to pick the first one as having a higher win rate is better for my mental state and the risk of significant drawdown should be less.
Thanks
Out of those two, I strongly agree that the first is less dangerous than the second, for exactly the reasons you said.
But I honestly wouldnāt trade either. Even the first is far too unrealistic for me to try it.
I canāt believe any retail forex trader could possibly trade consistently with a 60% win-rate and a 1:2.2 R.
Youād be doing better than 99% of the worldās fund managers!
Sorry, but thatās just not going to happen, and if itās what your back-testing appears to show, then your back-testing isnāt accurate.
Thanks for the reply.
What are you saying is unrealisticā¦the returns or the 60% win rate at 1:2.2 R?
Backtesting has been done on the 4h timeframe and have been as realistic as possible taking every setup except the 2am ones. The strategy is very mechanical and straightforward with little room to be ambiguous.
Obviously some trades will be missed but the win rate should even itself out to be about right. I have 250 trades in the backtesting data so far over 9 pairs starting January 24.
The only thing which I feel will mess it up is the spread which I havenāt been able to take into account. Shouldnāt be too bad on the 4h though and the RR is high enough to absorb it I think.
Any advice about where you think I am going around would be appreciated.
The 60% win-rate at 1:2.2 R.
No retail trader has ever maintained anything like that.
Seriously, I was understating it greatly, when I said that youād be doing better than 99% of the worldās fund managers: youād actually be doing far, far better than 99.9% of them!!
Sorry to sound negative, but if you look at it dispassionately and logically, you can surely appreciate that the chances of this happening, for a comparatively inexperienced retail trader, canāt possibly be much higher than 0%?
Nobody can confidently tell you where your backtesting might be misleading you, without going over it all with a fine-toothed comb (not really something you can do via a forum, obviously).
The common problems are small sample sizes (250 trades over 9 pairs is very, very little), overfitting (e.g. removing the 2.00am trades because they happened to be significantly worse than others over the sample you tested), not allowing for spreads/dealing-costs (I do agree that spreads āshouldnātā be hugely significant on a 4-hour system), using only a āsuitableā market (e.g. if you test a mostly-long-trades system over a period of time when the market was mostly rising/uptrend, itās bound to look very profitable until you start using real money and suddenly the market isnāt āmostly risingā any more!), etc., but there are many others, too.
Anyway, the thing to do next is clearly to forward-test on a demo account: do 300 trades exactly as you would with real funds, and see how well your back-testing āpredicted outcomesā do, that way?
OK. I just donāt know where I can be going wrong to be honest. I understand that these figures look good but didnāt think they looked that good!
I donāt mind negativity, its nice to be able to talk to someone else about it - trading can be a lonely place!!
You say the chances are very small - 0%, so what sort of figures would you expect from retail traders?
I keep doing more back testing each day and hope to have a bigger sample size - those 250 trades are the equivalent of around 70 months of backtesting and the only reason I donāt do the 2am trades is because I would be sleeping and wouldnāt be able to take them (UK GMT).
I do understand your points and I am skeptical but just cant see what it is I am missing.
My biggest concerns are correlated pairs giving big drawdowns and spreads at certain times of day as well as my own ability to trade the system!! Will only need to check the charts every 4 hours though and will be using limit orders most of the time to set and forget.
I will start forward testing next week but on a small live account - hate trading demo accounts. 300 trades is probably about 6 months worth of trades but will see after a month how well it goes. I will update on here if either good or bad.
The performance sounds impressive but from experience a high win rate of even slightly higher than 50% tends to be partnered with a low r:r, like 1:1.
The fact that you declare r:r to 1 decimal point or even 2 decimal points simply emphasises that this is all just theory.
What would really impress me would be demo trading this strategy. Believe me though, you absolutely must run this strategy, it will be the only way to gain the full picture, and if there is even just a small possibility it will be a consistent winner, you must find out. So definitely do it, preferably in demo, but definitely report the results here.
50 trades (1 month) will tell you nothing helpful.
Even 300 trades wonāt/shouldnāt give you complete confidence.
Iāll tell you what I would do, myself. There will be some people who will disagree with this, and it isnāt āadviceā: itās just what Iād do, myself. In addition to doing what you suggest above (not as an alternative to it) I would simultaneously test on demo a second version in which I cut that 6 months down to 6 weeks by using 1-hour bars instead of 4-hour bars.
Itās very likely to give you at least some indication of reality.
It will be less reliable than 4-hour bars, but only slightly.
The system wonāt and couldnāt, realistically, produce from H4 bars anything like the outcomes predicted by your backtesting without producing something at least similar on H1 bars. This will, in practice, be a much faster (and only slightly less reliable) indication for you.
But understand two things clearly. Firstly, Iām not suggesting that you should/would actually trade this for money using the faster method: itās just a quick, additional way to try to identify the problems, and part of ātestingā rather than ātradingā. Secondly, if thereās some sort of specific market/related or timing-related reason for not doing that, of which Iām unaware (an example might be if itās an āopening range breakout systemā) then ignore me!
Thanks guys. I will keep doing my backtesting to get as much data as I can. I will also trade this on the 4h with the higher win ratio setup as I think it will be more forgiving.
Trading the 1h would definitely work but means I would have to check the charts every hour and I just donāt have the time and would be inconsistent as a result.
The RR is in decimals purely because thatās what it is based on the fib entry, sl & tp.
I will update this thread with any results I get.
Iād go with the 60% win rate and 1:2.2 R as well for the stability it offers.
First option for me as well.
First week attempting to trade this strategy and I would say its overall positive!
I ended the week 0.2% in profit! I took 7 trades and had a 28% win rate.
Issues and mistakes I had:
I only entered around 30% of the potential setups which is down to my own emotions and fear. I have adjusted my risk down to 0.5% per trade to help with this.
The spread! Even though I am trading on the 4h timeframe, some of the trades might only be taken over a few candles so when it gets to 10pm GMT and spreads go all over the place I have been stopped out on one trade. Only solution I have is to relax the stops/orders/TPs for an hour at that time which is a ballache. Wish there was a way to just pause the trades for an hour!
Anyway. I will be reviewing all the potential trades that could have been taken this week and look to improve next week.
Well done so far, and thanks for an interesting update. Looking forward to seeing more. 
Second week trading this system and I would say itās another positive one.
I had a win rate of 41% over 17 trades. Profit was 0.22% but this was risking 0.5% so would be near to 1% if using 1% risk.
I didnāt close any trades during the big news events we have had. I was up 2.5% before one and decided to leave it - by the end of the day I had lost those returns. Iām still deciding what to do with news moving forward.
Issues/mistakes:
There were around 30 potential trades to take this week but I only took 17. Some of the reason was not being disciplined enough to get in front of the charts but most of it was finding a reason not to enter trades. Iāve gone back over each pair and looked at the potential return I could have had (3-5%) just by following the plan. Trying to overcome the emotions and tell myself that the only way to make it work is by sticking to the plan, take the next trade even if you just took two losses.
Iāve still had issues with the spreads but becoming more aware of it.
Iāve had poor entries on some pairs because of big spreads etc and it gives a poor R:R so have removed a few from my watchlist. My R:R average was 1:59 mainly because of these pairs.
Overall improvements have been made. The biggest think I must improve moving forward is just getting to the charts at every 4h candle and getting used to flipping through the pairs and trading the plan.
Without taking the probability of market returns into account, I believe the impact on overall returns would be minimal. Essentially, what youāre doing is redistributing losses or gainsāeither concentrating or smoothing them outāover time.
Are you refering to taking more trades? My testing has suggested otherwise is the only reason.
I believe that the 40% win rate is below average based on testing and should be closer to 50%. More trades should give me better results.
I may just be spouting hopium but the issues I have described above is me trying to get to a point where I am implementing the system correctly and giving it a fair chance.
Both are solid, but higher win rate (60%) suits your mindset and reduces drawdown stressāgreat choice for consistency!
Worst week so far. I decided to change some entry criteria on the fly and it didnāt end well. Recovered by end of week and am around break even.
Have reviewed trades and will hit it again on Monday.
I would go for whichever that Iām the most comfortable with. Because after the slight edge that strategies offers, is all about the mental game, and I want to be in a sustainable mindset throughout the trade.
Iād rather have a real, proved edge first and foremost, and worry about mindset later.
Iāve found that whatever I do, I canāt have an appropriate mindset without having a real, proved edge to start with, but once I have that, mindset takes care of itself. People vary, though.
Well done, being in profit.
I wouldnāt be able to cope with a 28% win rate, myself. The inevitable losing runs would absolutely terrify me, and Iād really never know whether my method still worked. That would ruin my mindset, I know.
Iād rather have a much higher win rate, even if I make a little less profit with it. Though I donāt really think I would, because having a high win rate makes the position sizing so much easier to handle. For me, anyway.
Good luck moving forward, with your system. The figures you gave in the first post are about the best Iāve ever seen. 
For very many others, too!
Even plenty of people who really do have a real edge (whether they know how to prove that or not) manage to lose rather than winning, because they form their impression of āappropriate position sizingā from forums and/or Youtube, so they wildly overstake, hit a normal losing run and either wipe themselves out or abandon ship.
The standard-ish way people āwork outā position sizing is to look at what longest losing run was so far (typically over a hopelessly inadequate sample size), add about 50% for adverse contingencies and then āwork outā their position sizing on that basis.
Absolutely hopeless, for several reasons. 
The tragedy is that some of them actually do have a real edge and still donāt profit from it. 