The reason that most traders fail is and I guarantee this,  note the use of the word guarantee. It is the simple fact that they have not back-tested their system on a minimum of five years of data and preferably ten to fifteen years on all the currencies or instruments that they trade.

Yeah yeah I here you saying it now,

1. I don’t believe in back-testing I only believe in forward testing
2. Its very hard to to back test my system
3. I am not a computer programmer I can’t do that

and on and on it goes. It is very easy to find an excuse to not spend the hundreds of hours that are involved in back-testing and finding a profitable and consistent system.  But you will sit there for say four to ten hours a day demo trading  or even worse, live trading a system that you have absolutely no idea at all whether it even has an edge let alone can produce profits consistently and inevitably  losing money.

I ask you to ask yourself these questions and answer them truthfully.   Note: this will probably hurt.

• How long have I been trading
• Do I produce consistent profits or am I even profitable at all
• Do I know my expectancy
• what is the maximum this system has drawn down before, 10,20 40% ??????
• What is the maximum number of losing trades this system has produced in a row previously
• What is the longest draw down period that this system has produced before

If you do not know the answers to all these questions what chance of survival in the trading game do you have.NONE!!!  When trading any system without these answers you can not even realistically calculate your position size as this has to be measured accordingly with your back-tested results in regards to maximum no of losing trades and absolute draw-down.

Even if by some chance you are trading a profitable system your chances are still very limited of being successful.  Imagine risking 3% per trade on a system that has previously produced ten losing trades in a row.  I ask you, could you really handle that psychologically?  I doubt it, when your account is bleeding like that it is extremely hard to think clearly let alone take another trade, and then another trade.  Now if you know this information you can gear your risk accordingly and say risk 1.5%.  A 15% draw-down will be much easier to handle than a 30% draw-down.  That is why back-testing is of the absolute most importance,  because it gives you the information to gear your trading around and also the ability to set some realistic goals.

Once you have defined your edge you can then set your risk parameters accordingly, you will be armed with the information of draw-down expectancy and how many consecutive losing trades you can expect.  This does not guarantee that you will only have x number of losing trades in a row, as markets do change and results will vary.  What it does do though is arm you with a good idea how your system performs over time and on different markets.  This information gives you the confidence to keep trading through the tough times.

This is where I use Forex-Tester.   I have now literally spent hundreds of hours testing my ideas and will spend hundreds more I have no doubt.  This software makes it possible to literally test any of your ideas on any instrument and,  you need no programming skills at all.  Where it really excels is when you are a discretionary trader and your systems is not able to be programmed even if you have the skills.

In closing if you have not back tested your system and you are not profitable in your trading stop gambling now! That is what you are doing if you have not back-tested,  GAMBLING!  Believe me a few weeks spent back-testing and PROVING  you have an edge will be the best thing you will ever do.

Good luck but believe me you won’t need it once you are armed with the right knowledge.

Perry

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Popularity: 4% [?]

Forex Tester is the ultimate trading simulation software that allows speculators to conveniently test their strategies and ideas on historical data on a simulation platform  before investing their real money. Novice traders are sometimes too quick to jump into the market with real money after they have tested an idea for a month or two on a demo account with a broker and have produced some convincing results.

Experience has taught me just how unreliable testing like this is. All it takes is for one to be doing this testing in say a major bull move and the results would look astounding. This compels one to jump straight into the market with real money expecting to see these fabulous returns. It then only takes for the market to go into a long sideways period of price movement and these gains would be quickly evaporated and some. This causes traders to leave a method in disgust and go in search of the next method, in the game we call this the hunt for the holy grail, well rest assured no such grail exists.

A word on DEMO accounts, I would say that every broker these days have free demo accounts.  Some of these are only good for thirty days and others can run indefinitely.  The brokers role is to  accumulate customers and get them trading live as soon as possible and thus generating revenue for the brokerage firm.  These Demo accounts are just one of many marketing tools they use to get people involved in the markets and comfortable with their platform.  If you are unfamiliar with a brokers platform these demo accounts can be a great tool to allow you to familiarize yourself with it.

Outside of that in my honest opinion they are a gimmick to lull new unsuspecting traders into thinking they can trade and thus start way to soon trading real capital without the necessary experience needed to trade properly.  Realistically thirty days is a fine period of time to learn to use a platform but to learn to trade is a much longer and arduous path.

The greatest downside I see to a demo account is to trade profitably you need to have a proven method that you have traded on many years of data.  I just cant imagine trading a system for say two years on demo just to prove it is a nonviable method and then to either tweak it or trial a completely new system and start all over again, this could be an extremely fruitless mission not to mention time consuming and devastating to one’s psyche.

This is where Forex Tester comes into its own. This software gives you the ability to test your strategies on unlimited amounts of data. The site can provide quality data since 2001 which should give anyone a good idea how reliable a system is long term. You also have the option to download your own data, this can be in ASCI II (.csv,.txt) or MT4 format (.hst).

“The markets change and the markets stay the same” is a great adage to think about.  No system will work all the time as the markets change from trending to ranging and back to trending. No one knows how long any of these patterns last but if you have a system that has survived various different market conditions, you are definitely in good stead to become a profitable trader. That is the thing with Forex Tester, it can give you that experience and grant you the confidence to trade your method even when it isn’t performing. This is because you are armed with the knowledge of just how many losses it has produced previously and the type of swings you can expect in your equity curve. This is an extremely powerful tool and anyone considering trading should not be without it!

Here is a list of just some of the things I like about the ForexTester

• Stop and limit entry orders (as well as market orders) – also applies to exit orders
• You can program a dll using their API library and employ your own strategies
• You can import your own csv, txt or MetaTrader 4 (hst) forex history files – You can use free forex data from sites such as Forexite and Alpari
• You can take screen shots of your trades
• You’re not restricted to just forex data you can test anything – even stocks or indices!
• You can exit positions partially
• You can have multiple charts on multiple time frames
• You can export your account trading history so that you can analyse your trades in Excel
• They provide a chart on the equity curve of your trades
• You can add comments to each trade so that you can analyse your performance better
• They have support by way of a public forum
• The ability to import data and append it to already existing data
• And they allow you to test their platform for free for 14-days

The greatest advantage of all I see with this software is the fact that you are manually testing your method on the data.  I have had so many people say “why bother I will just programme an EA in MT4 or pay someone to do it, it’s much easier”.  My reply is ” yes that would be much easier and also less time consuming, but will this instill in you the confidence to trade this method live when it took just five minutes for a computer to crunch the numbers”.

I don’t think so!  First major draw down and I bet you will abandon the method because you don’t have that faith in your method.  But if you spent two hundred hours testing you method you would have all that screen time to bolster your confidence to trade it live.  Without this confidence you won’t succeed for you will lack the conviction to persist through the draw downs, and believe me there will be draw downs.  If you don’t think you are going to have any draw down well you are definitely in need of this software as your are very misinformed.

Trading is just like any other career, sport or hobby.  If you want to be good at it you have to practice, practice, practice and practice some more.  This is how all the top performers in any field succeed, ForexTester allows you to do this.  So get it, try it and practice until you get it right, this is the path to financial freedom.

As I am such A strong believer in this software I have partnered up with ForexTester and for anyone that purchases  it through ForexToFreedom.com will receive a $20 dollar discount and can purchase it here for just 130 USD instead of the normal 150 USD amount.

Popularity: 11% [?]