In this episode of Truth About FX, Walter talks about testing multiple markets or multiple timeframes at the same time in a forex tester. According to his experience, there are a number of set-backs you could get from doing this. Walter also gives a reliable and simple tip a realistic equity curve that you could use on your trades.

Download (Duration: 06:35 / 7.53 MB)

In This Episode:

00:53 – painful

02:06 – flattens out

04:18 – calculator

06:03 – spreadsheet

Tweetables:

Take up all your data and put it in a spreadsheet. [Click To Tweet].

Know your numbers, your average winner and losers.  [Click To Tweet].

Hope for the best but plan for the worse. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter. When you are doing some backtesting, do you ever test multiple markets or multiple timeframes at the same time in forex tester?

Walter: I used to do this and what I found is that you end up messing up. You miss some trades and then you go back and back space and say “I would’ve taken that” but the problem of that, of course, is now you’ve seen the future.

It’s like you are using hindsight bias in your backtesting which is awful so I just stick to one pair and now, I know it is painful, I know it takes forever. I know people do not like to do that but it really does make sense.

Otherwise, you have to advance one bar, check all the chart, advance another bar, check all the chart and that is painful too. I would just go with one and if you are trading the weekly charts or the daily charts, you are not going to get a lot of trades anyway so you can blow through those data.

Those data might take you only… Ten years worth of trades might take you only two weekends or something like that or ten hours of trading so testing in forex tester, it’s not that big of a deal.

I just break them up like that and, here’s a tip, you can take up all that data and put it in your spreadsheet, sort it by date. What that means is you’ll get an equity curve of what it would look like if you are trading that in the real world.

You’ve done all these EUR/JPY testing, GBP/AUD testing and USD/CHF testing, you put those three pairs together and sort by the entry of the trades. When you get into the trade and what you have is you’ll have these winners and losers that are popping up on your spreadsheet.

You can draw your equity curve based on the balance of the account and then you’ve got some really cool… Because you can see how trading multiple markets flattens out your drawdown and things like that.

Hugh: Okay.

Walter: That is a really cool way to see that.

Hugh: That is a great tip. While we’re around the topic, putting the data into a spreadsheet, what else could you do with the spreadsheet that maybe you couldn’t do in forex tester too?

Walter: With the spreadsheet, you can change your risk parameter. Let’s say that you are trading 1% risk on each trade so you co...