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Hello and welcome to this video, it will help you to improve your algorithmic trading results in the next 12 months.

 

In the last video we have talked about the one thing you need to do to improve your process. 

 

In this video we will talk about what kind of advantage will help you to improve your results in a fraction of the time other traders need.

 

A few years ago I have seen a movie about a woman.

 

She got up one morning and went to the subway. 

 

In one version of the day she was able to get there in time, in the other version she missed the subway.

 

From that point both versions of her life drifted into opposite directions.

 

In one of those versions she found happiness, in the other version she died.

 

I don’t know the name of that movie, but it describes what automated backtesting can do for you.

 

You can’t live two different versions of the same day, but you can trade two different versions of the same trading year.

 

It is not very hard to do that and here is how.

 

First you need to define what you want to do. 

 

For example you can trade the Bollinger Bands, my favourite entry signal, or you could trade a simple moving average or anything else.

 

You now have to define the entry signal.

 

Would you like to open a trade on a trend or would you prefer to trade breakouts?

 

I prefer to trade trends.

 

Would you like to trade a standard entry signal, or would you like to modify something like the number of calculated candles?

 

I prefer to trade Bollinger Bands with standard settings.

 

So, whatever you want to trade, make a decision and do a backtest.

 

Like I said, you can go to YouTube and search for “Standalone Expert Advisor” and you will find a lot of my free videos for different entry signals, source code included.

 

Once you have done at least one year of trading in a backtest, you will have a result.

 

It doesn’t really matter if it is a profit or a loss, the most important thing is that it is a MEASURABLE RESULT.

 

It is what it is and now you need to find a way to improve it.

 

To improve your result, you simply need to change a single thing.

 

Don’t try to change ten different things, change just one single thing.

 

For example you could increase the take profit value.

 

Now you trade the same trading year again. 

 

All the settings are the same, except that you have increased the profit value.

 

This backtest will also produce a MEASURABLE result. 

 

Is it better, or is it worse?

 

You don’t have to guess, you can compare the numbers.

 

If the result is worse, try to decrease the take profit value.

 

Do another backtest. 

 

Now you have three results.

 

You have the original result.

 

You have the result with the increased take profit value.

 

And you have the result with the decreased take profit value.

 

Are you happy with the results?

 

How do you know if you have really improved something?

 

So far you have done a backtest and you have changed one single thing to create additional results.

 

To really improve your results, you need more data and avoid to be a victim of heuristics!

 

In this video we have talked about what kind of advantage will help you to improve your results in a fraction of the time other traders need.

 

In the next video we will talk about what will help you to really improve your ability to make good decisions for your trading system. 

 

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