Do You Have an Edge in The Market?
Hello, traders!
Have you ever wondered why it feels so hard to be consistently profitable in trading?
If you have, It's okay. You're not the only one
In fact 90% of traders lose money consistently.
What have they done to deserve that?
This is what 90% of traders do:
- looking for holy grail strategy
- when it fails, they jump to other strategy
- they never verify the strategy by doing their own research (back testing, forward testing, live account demonstration)
- rinse and repeat
With this mentality, they've become jack of all trades and masters of none. They took every possible opportunity without knowing the probability of the outcome. With so much strategy in their mind, the trading outcome become random and haphazard. If you include the emotional damage factor, this approach in trading will bring negative equity expectancy in the long run.
Instead of jumping from one method to another, ask yourself this question:
1. What specific method do you use?
2. What timeframe?
3. What kind of market work with the method?
4. How many sample do you have in your back test?
5. How much is your average win rate, risk reward?
The clearer your answer, the better. It will give you more confidence in your strategy execution. You'll also be calmer when losing streak comes. Less emotional damage = better outcome and more consistent result. Here's an example from one of my backtest (not a recommendation to use my method, please do your homework):
1. What specific method do I use?
In this example, I use trend continuation chart pattern (mostly flag, rising/falling wedge, pennant, symmetrical triangle).
I use ema200 as filter. If the price is below ema200 I have sell bias. If the price is above ema200 I have buy bias. So if I see bullish chart pattern while the price is far below ema200, I won't take the trade
I add MACD as momentum indicator. If the setup accompanied with MACD crossover, it shows momentum shift and good potential entry point.
2. What timeframe?
I use m30 timeframe in this back test
3. What kind of market work with the method?
I tested with best results in JPY forex pairs (especially AUDJPY, GBPJPY, CADJPY) and AUDUSD
4. How many sample do you have in your back test?
in GBPJPY I have collected 110 trade sample with the same method from January 2021 to December 2021. (I recorded the screenshot of the back test too)
5. How much is your average win rate, risk reward?
In those 110 sample, I got 72 wins and 38 losses with 1:1.5 risk to reward ratio. This means I have about 65.45% win rate. So this system gives me positive return expectancy based on the back test.
After you've answered these 5 questions, you can do forward testing with a small account (if you want to use demo account first, It's okay. But take into account you won't experience the emotional factor). Record your trading result until you've gathered enough data and you feel comfortable with the result.
Congratulation, you've got yourself a proven strategy that you're comfortable to trade with. After that, all you need to do is be so good with that system until it becomes very intuitive to you.
Stick to one method and become the master of that method.
Just as Bruce Lee said:
"I fear not the man who practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times"
Don't be lazy and do your homework dear traders!
Have you ever wondered why it feels so hard to be consistently profitable in trading?
If you have, It's okay. You're not the only one
In fact 90% of traders lose money consistently.
What have they done to deserve that?
This is what 90% of traders do:
- looking for holy grail strategy
- when it fails, they jump to other strategy
- they never verify the strategy by doing their own research (back testing, forward testing, live account demonstration)
- rinse and repeat
With this mentality, they've become jack of all trades and masters of none. They took every possible opportunity without knowing the probability of the outcome. With so much strategy in their mind, the trading outcome become random and haphazard. If you include the emotional damage factor, this approach in trading will bring negative equity expectancy in the long run.
Instead of jumping from one method to another, ask yourself this question:
1. What specific method do you use?
2. What timeframe?
3. What kind of market work with the method?
4. How many sample do you have in your back test?
5. How much is your average win rate, risk reward?
The clearer your answer, the better. It will give you more confidence in your strategy execution. You'll also be calmer when losing streak comes. Less emotional damage = better outcome and more consistent result. Here's an example from one of my backtest (not a recommendation to use my method, please do your homework):
1. What specific method do I use?
In this example, I use trend continuation chart pattern (mostly flag, rising/falling wedge, pennant, symmetrical triangle).
I use ema200 as filter. If the price is below ema200 I have sell bias. If the price is above ema200 I have buy bias. So if I see bullish chart pattern while the price is far below ema200, I won't take the trade
I add MACD as momentum indicator. If the setup accompanied with MACD crossover, it shows momentum shift and good potential entry point.
2. What timeframe?
I use m30 timeframe in this back test
3. What kind of market work with the method?
I tested with best results in JPY forex pairs (especially AUDJPY, GBPJPY, CADJPY) and AUDUSD
4. How many sample do you have in your back test?
in GBPJPY I have collected 110 trade sample with the same method from January 2021 to December 2021. (I recorded the screenshot of the back test too)
5. How much is your average win rate, risk reward?
In those 110 sample, I got 72 wins and 38 losses with 1:1.5 risk to reward ratio. This means I have about 65.45% win rate. So this system gives me positive return expectancy based on the back test.
After you've answered these 5 questions, you can do forward testing with a small account (if you want to use demo account first, It's okay. But take into account you won't experience the emotional factor). Record your trading result until you've gathered enough data and you feel comfortable with the result.
Congratulation, you've got yourself a proven strategy that you're comfortable to trade with. After that, all you need to do is be so good with that system until it becomes very intuitive to you.
Stick to one method and become the master of that method.
Just as Bruce Lee said:
"I fear not the man who practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times"
Don't be lazy and do your homework dear traders!
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