HOW TO TEST IF YOUR FOREX TRADING STRATEGY IS PROFITABLE
If you have been trading forex or thinking about learning to trade, you would no doubt have seen plenty of statistics plastered online about most retail traders being unprofitable.
There is truth to these statistics and there are a myriad of reasons as to why forex traders can be unprofitable and lose money within the markets. Ultimately though, most traders that lose money trading are losing because their trading strategies are not profitable.
Refine The Trading Strategy & Retest
Now you have the results of the backtest, you can tweak various aspects of the trading strategy in order to see if you can obtain better results. For example, entry criteria could be adjusted slightly, or risk management changes might lead to lower drawdown on the account. You should test a handful of different tweaks and see what works. However, you need to be careful about ‘over optimizing’ your strategy.
This happens when traders test thousands of different combinations of changes to obtain the best possible results for the backtest data. However, you can end up just making a perfect strategy for that dataset, not actually the live markets.
This often leads to traders having unreal backtest results and losing money or being disappointed when trading their strategies live.
It’s worth optimizing, for sure, just be careful and draw the line!
Deploy Within A Prop Firm Challenge
By this point, you should have a very clear indication as to whether or not the trading strategy is profitable, or has been profitable over the last few years. From conducting the backtest, you’ll also know the maximum drawdown, maximum consecutive losses and other risk management stats, which will allow you to figure out the perfect risk per trade you should be using to remain safe whilst trading. If your trading strategy has promise, it’s worth starting a prop firm trading challenge. Prop firms essentially allow traders to take on a large amount of capital to trade, in exchange for a profit split.
For example, at Lux Trading Firm we fund our Elite Traders with up to $10,000,000 in real capital to trade with. We split the profits the traders earn each month, in exchange for providing the capital.
This is going to be the fastest way for you to start earning some good sized amounts from your trading strategy!
Alternatively, you could sign up with a trading broker and start trading your own funds – but this will take many years of consistent growth to compound to a reasonable amount.
Conclusion – How To Know If Your Trading Strategy Is Profitable Or Not
In summary, it’s entirely possible to test a forex trading strategy before taking it to the live markets. You’ll never know with 100% certainty the profitability of a strategy due to the fact the markets are constantly evolving and backtest data does not guarantee future results. However, it’s the closest you can get, without risking your money!
Are you looking to become a prop firm funded trader? Work with Lux Trading Firm today!
About Company :-
We are a leading proprietary trading firm based in London (UK), specializing in supporting experienced prop traders.
Our commitment is to help traders excel and provide the tools and capital they need to compete in a marketplace defined by change and disruption.
We are focused on seeking out trading and investment opportunities to grow our capital in the global financial markets.
Click Here For More Info.:- https://luxtradingfirm.com/
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