Scenario A: Seething Courage to Carry On
One thing for sure: if you trade with real money versus demo accounts, your whole trading psychology will change. What you dare to do in a demo account, you may not dare to execute live. For example, you have a strategy to average in your orders. You take a buy order but the price moved against you. You take another buy
order, hoping to average your price entry. Meanwhile the strategy advocates no stop losses for you entries. When you run it off the Strategy Tester, the results show a profitable strategy. But when you eventually run it live, you may not stomach the drawdowns, and wondered how many levels you need to go before the prices come back. You pull the plug - aha - human intervention of a EA - is that good or bad? Let's not answer this question for now. But the point is this - if you execute orders against a trend, and your orders have no stop losses, how would you behave in live trading against a backtest or even demo account?Scenario B Seeing the EA through.
Suppose a backtest of a trading strategy over a year period, say 2008, showed a not so profitable period but eventually it ended with a nice profit It is comforting to start off with your EA making profits but what do you when your EA makes a string of losses? Do you carry on or do you stop the EA? The graph shows an EA performing well for a period and then becomes non profitable
(period 262) and finally coming through at end with a nice profit. Great graph to look at. But how do you behave during the one year period rather than a few seconds or minutes of simulation?
Scenario C: Seeing is Believing
Or you were told that Metatrader's Strategy Tester is useless and inaccurate. Suppose your EA showed such
a negative performance in the Tester, would you go ahead and trade it live? If the Strategy Tester is lying when you get good graphs, how much lies are you getting from a downward spiralling profit graph?
Scenario D: The Seeing Leads the Blind
Neural networks are getting popular these days for forex trading. One thing about NN systems is that you need to do some optimisation because it is a pattern recognition system and hence as new patterns comes over a new period, the software needs to be trained. During demo, you watched the EA fire orders, and you have no idea how it figured out when to send an order and when not to. During live, the same thing happened. When it makes money for you are fine! When it loses, what do you do? What have you learnt about trading from such a strategy? Nothing! Is that what you want? If so, then neural network-based EA are for you.
Suppose a backtest of a trading strategy over a year period, say 2008, showed a not so profitable period but eventually it ended with a nice profit It is comforting to start off with your EA making profits but what do you when your EA makes a string of losses? Do you carry on or do you stop the EA? The graph shows an EA performing well for a period and then becomes non profitable
(period 262) and finally coming through at end with a nice profit. Great graph to look at. But how do you behave during the one year period rather than a few seconds or minutes of simulation?Scenario C: Seeing is Believing
Or you were told that Metatrader's Strategy Tester is useless and inaccurate. Suppose your EA showed such
a negative performance in the Tester, would you go ahead and trade it live? If the Strategy Tester is lying when you get good graphs, how much lies are you getting from a downward spiralling profit graph?Scenario D: The Seeing Leads the Blind
Neural networks are getting popular these days for forex trading. One thing about NN systems is that you need to do some optimisation because it is a pattern recognition system and hence as new patterns comes over a new period, the software needs to be trained. During demo, you watched the EA fire orders, and you have no idea how it figured out when to send an order and when not to. During live, the same thing happened. When it makes money for you are fine! When it loses, what do you do? What have you learnt about trading from such a strategy? Nothing! Is that what you want? If so, then neural network-based EA are for you.
I hope you have a flavour to look out for what your heart tells you.
No comments:
Post a Comment