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I feel like I've got a good strategy but
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I have a lack of confidence which is
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stopping me from generating Real Results
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in the markets what should I do if
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you've ever found yourself asking this
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question the answer is to back test this
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video is sponsored by Forex tester 5
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which is the back testing platform that
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I use we'll talk about more on that in a
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bit and in the next 10 minutes I'm going
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to show you start to finish how you
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should be back testing to get the
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results that you want so first of all
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what is back testing now back testing is
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the act of going back through Pass
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prized data and trading it as if it was
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live you will then collect the
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information you get from your back test
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and you'll be able to see how viable
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your system is and as well as that
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you'll build confidence and you'll build
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market experience on seeing the kind of
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Trades that come around under your
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strategy now I find this super important
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it's just like practice for anyone in
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any profession if you do this practice
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you're going to obviously develop your
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skills further than someone who isn't
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and most importantly you'll actually get
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to see that your system wins and this is
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really important because if you go to
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trade live markets without confidence
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behind your strategy you're going to
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find it difficult to apply a strategy in
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a winning way even if the strategy is a
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winning strategy if you can't apply it
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properly due to a lack of confidence and
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experience then you're not going to get
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good results so in my opinion back
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testing is one of the best things you
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can do and I've been asked the question
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a lot what did you do to get over the
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line from losing into winning now for me
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I got my trading down very well but I
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was lacking confidence with my trades
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and I was struggling to hold my winning
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trades and sometimes I would hesitate
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out of Trades and close them at loss
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which then went on to be winners this
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was due to the lack of confidence and
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the lack of real market experience
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around the strategy that I'd built so
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when I got down to back testing this
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remedied all the problems that I had and
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that is actually what pushed me over the
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line so if you're a Trader who's perhaps
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one two or three years into your trading
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journey and you're struggling to just
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get yourself over that line to success I
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highly recommend giving back testing a
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go I think everyone should be doing it
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some people will disagree with me but
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I've never seen a Trader get worse from
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back testing okay so before we get into
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the back testing processes and how
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exactly I would advise you to go about
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doing your back testing there is one
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point I want to make and that is that
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back testing will not solve all of your
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problems okay when you back test there
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is no emotion and there's no real money
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involved so the psychology side of
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things needs to be mastered elsewhere so
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what I want you to understand is that
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back testing is something you can do to
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Aid your trading Journey but you won't
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exactly back test your way to success if
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you're not working on the other things
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okay there's a lot of things you need to
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focus on in trading your risk control
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your psychology your technicals your
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fundamentals making sure you have a
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solid trading plan making sure you're
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journaling all of this is equally as
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important as one another okay so what do
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we need to back test we need a little
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bit of a toolbox here first of all you
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need a trading strategy and a written
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down trading plan showing your
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repeatable process from start to finish
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second of all you need some form of
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folder structure or note taking platform
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so that you can save your screenshots
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you could use notion or you could just
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set up some folders like this on your
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desktop and if you want to go one step
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deeper you can use a Forex journaling
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platform like trading Vault or Edge wonk
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and then the last thing you're going to
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need is a back testing platform now I
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person L recommend investing in a back
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testing software because I think this is
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going to give you the best odds to
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succeed you can back test years and
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years of data using these and they're
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all very streamlined and they save you a
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lot of time while you're actually doing
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your testing work but if you're not
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willing to invest in a back testing
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software you can use trading views bar
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replay tool however you are going to be
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somewhat incredibly limited on the data
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you can collect because if you're
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trading low time frames you can only
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back test around 3 to four weeks of data
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as opposed to some of the back testing
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platforms allowing you to go back 20
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plus years so to recap you need a
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trading plan and a trading strategy you
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need a folder structure or a note taking
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platform to save your screenshots and
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you need a back testing platform that
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you can actually do your testing on once
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you've got all of those things you can
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start back testing so let me show you
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the process okay so Step One is putting
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together your trading plan for your back
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tests now because you're back testing
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your trading plan doesn't need to be as
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in-depth as your live plan needs to be
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you don't need to include the
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psychological side of things all that
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you need to note down are the following
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things so first of all what percentage
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of your account will you risk pet trite
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I would advise going with 0.5 to 1% and
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not really much past that because this
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will set you up nicely for keeping your
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Live account safe and also getting
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funded and keeping your funded account
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safe next you want your repeatable
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system plan so as an example for this
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video we're going to use a very simple
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plan and we are going to use the
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following system rules step number one
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we will identify the short-term Trend
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Direction by looking for a break of
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structure step number two we will then
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look for imbalanced Supply or demand in
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line with that trending structure step
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number three we will place sell or buy
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limits on the supply zones or the demand
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zones and we will Target the next low in
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the trend now as you can see this is
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super simplified but it gives us a
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repeatable process that we can follow
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trade after trade this is what you want
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because this is going to be the easiest
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way to build solid data on a repeatable
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plan that's not super discretionary and
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will be easy to go and apply to the
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markets when you come to your back
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testing and your life trading once you
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have that plan it's time to set up a
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folder structure or a note taking
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platform or you can use notion and
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follow the same concept and maybe write
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a little note around each chart
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screenshot that you take while doing
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your back testing so now let's get into
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the actual back testing process okay so
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now that we've got our folder structure
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and our trading plan prepared we can
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actually start to do some back testing
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so for this I've gone over to Forex
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tester 5 this is the back testing
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platform that I use and the one that I
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would suggest to you as well I've
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actually tried out quite a few this is
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my favorite by far but you'll get to see
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if you like it or not in this video and
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then you can make an informed decision
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about what back testing platform you're
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going to use but without further Ado
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let's get into it so what we would do is
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open up a new project and we would then
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apply as strategy as written out in our
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trading plan within this back testing
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platform so in our trading plan we said
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we were going to look for a break of
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structure then we were going to sell
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from Supply or buy from demand and we
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were going to Target the next low okay
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so very simple strategy and that's what
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we're going to apply here now what we
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could actually do is Mark up that we've
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got this break of structure just here
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then we can see we have this Supply Zone
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just up here previous one was retested
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so now we can Mark out that supply and
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now we know when price comes into this
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area here we would look to sell with our
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stop loss above the high
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so what we can do within Forex test of 5
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is actually place an order uh and I'm
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going to show you some of the reasons
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why I really like this platform it
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allows you to do builtin risk management
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which when I was using some of the other
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back testing platforms they don't allow
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this so you actually have to do position
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sizing if you want to be as realistic as
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possible with your testing it really
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takes up a lot of time and makes it kind
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of tedious to do so I really like this
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builtin process this makes it a lot
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better for me and then what we can do is
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place an order and as you can see it
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pretty much is identical to what we
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would do within the metatrader desktop
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platform we've got our entry at the
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bottom of the zone I'm going to go a
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little one pip higher for the stop loss
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clear in the top of the zone and then
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our Target is down into the low okay
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following on from what we spoke about in
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our trading plan now we're risking 1%
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here we have a $50,000 account all of
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that is totally able to be fine-tuned so
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you can set your starting balance you
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can set your time zones so now if we
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place that order we can see that we have
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a sell limit at this level we have a
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stop loss at the high and we have our
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Target down into the low now I'm going
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to delete all the objects here and want
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going to do is actually just leave us
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with our trade order and now we can
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actually allow the market to play
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forward in real time by resuming the
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project and we get to see what the
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market would act like in an actual
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trading scenario and as the market moves
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down towards our Target you can see on
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the open positions order that we
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actually see this profit stacking up so
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right now we're running around 3% on
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this position if this fills the take
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profit I think we get around 6% in
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profit or 5% and if it loses obviously
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we're going to lose 1% because that's
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what we've risked so as you can see this
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is a super realistic Trading environment
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uh and it pretty much allows you to
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trade and build experience for your
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systems as well as collect the data and
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build your confidence there in a very
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realistic scenario you can even see the
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candles moving step by step and I think
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that ability to speed it up or slow it
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down is really good because you get to
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see what actual candle movements would
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be like when you were in a trade so as
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you just saw there when the trade hit
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take profit we now get this trade
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history okay we have the sell was
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entered there the buy was taken there so
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that's where we got in that's where we
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got out and as you can see now the
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balance down here has actually gone up
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in the same way with a metatrader we are
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now up
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$2,946 so we did make around 6% or sixr
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on that trade if we go to account
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history we'll actually see that setup in
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there as well so it gives you a really
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realistic and enjoyable trading platform
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to work within and the best thing about
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it is while you're actually collecting
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this information it saves all of the
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data for you in the background so if you
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head over to the windows Tab and click
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statistics you will now see all of the
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trades we've taken which obviously for
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this project is only one so far will be
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tracked within here and this is going to
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allow you to see your win rates average
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winning trade size your average losing
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trade size how long your winning and
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losing trades take to play out how much
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profit per week or month you collect and
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it's even going to provide you with your
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expected outcome value over a long
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enough time span once you've taken a
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bunch of Trades so it will give you your
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expected monthly returns your expected
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weekly returns and all of this super
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valuable information now the reason I
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really like this is because on other
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back testing platforms or if you're back
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testing with trading view you have to
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save all of this information yourself
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otherwise you're not really going to get
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the most out of your testing so being
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able to just collect it straight in here
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is in my opinion really really nice now
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the next thing we would do is screenshot
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this chart move it over to our folder
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structure or our note taking platform
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because this way we actually get to see
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the trade after the fact so we can go
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back and instead of just looking at
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numbers we also get to see the actual
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charts that we executed so what we would
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do is simply mark up this chart for the
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reasons we executed the trade so we have
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our supply Zone there that we entered on
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we could put a note saying our stop-
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loss was above this level we could put a
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note saying that takeprofit was down at
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this low here and then you'll see that
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this actually fits perfectly into what
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we designed in that trading plan and now
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if you save enough of these trades
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you've got a massive Bank of information
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that you can look back on to see what
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your great trades look like and what
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your poor trades look like and you'll
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find patterns within those as well which
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is going to further allow you to refine
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your strategy and Achieve better
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Statistics over here in a back testing
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scenario before you take it to the live
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markets and that's it that is The
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Ultimate Guide to back testing your
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strategy and why you should do it so
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it's actually quite a simple process but
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most people Overlook it or ignore it
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entirely because they can't be bothered
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to put in the work I've never seen
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someone get worse from back testing and
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for myself it's actually the thing that
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allowed me to push over the line and
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build the confidence on the systems I
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developed to actually apply them
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properly to the live markets and achieve
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the success that I was looking for so I
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definitely recommend you try it out and
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stick to it long term because it's going
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to build confidence experience and
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valuable data that will allow you to
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trade your systems to your best possible
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efficiency when it comes comes to
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trading live now if you're interested in
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getting Forex tester 5 which is the back
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testing platform I've showed you in this
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video head over to the link in the
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description there's a 10% discount on
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there and that will be layered on top of
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any sales or discounts that Forex tester
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themselves are running so you should be
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able to get a really good price and for
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a one-off investment I think it's well
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worth doing because you have a back
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testing platform you can continually use
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for years to come to collect data on any
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systems that you want to try out and
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continue refining your Edge if you've
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got any questions about the back testing
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process please let me know in the
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comments below and I'll be happy to help
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you out where I can that's it for this
00:11:02
video I hope you've enjoyed it if you
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have please drop a like make sure you
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subscribe to my channel I post
00:11:06
educational videos and Analysis videos
00:11:08
every single week that's all from me
00:11:10
thank you for watching and I'll see you
00:11:11
in the next one
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