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Chapter 31, Part II. Mechanical System Creation Framework. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 27, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    8. Test your system with hardware. There are two ways of testing it as to follow it in real trading.

    You can do it manually or automatically. You can do it manually if you are not so friendly with programming. This could be done as follows:

    - Find a historical chart for a significant period of time.

    - move to the first candle, from which you intend to start the system

    - Then move candle by candle and fix in an Excel sheet all information according to your system – where you enter, place stop, profit and actual exit (with profit or loss). The major requirement here is to be honest with yourself. It’s better to understand that your system is junk on historical data, rather than on real account and lose the rest of the money that you still have…

    - If back testing has given you acceptable results – you have to trade with this system in real-time on a demo account, probably 2-3 months will be acceptable, if you have chosen as your preferable time frame daily or lower;

    - If trading on demo leads to a good result, you may shift to a real account.

    If the computer is your friend and you are a second Bill Gates, then you can try to program your system with a built-in language, say in MT 4 software. In this case you will spend most of your time on programming, rather than on testing. This method has huge advantage:

    - When a system’s program is prepared, the back testing procedure (at least running through historical period) is much faster than with the manual approach;

    - You may delegate the possibility to make trades and place orders to the system directly;

    - You may apply fine tuning to the parameters of the system, adjust risk and money management parameters very fast and see the results. Manual adjustment will force you to pass manually through the same historical chart again and again – this will demand a lot of time.

    - Automated testing of the system excludes all human being biases mistakes and other errors.
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