Friday, 16 September 2011

Does It Really Work?

There are so many myths in our business about what works and what doesn't.

“It ain’t so much the things we don’t know that get us into trouble. It’s the things we know that just ain’t so,” said early American humorist Artemus Ward.

Of course there is a three step way of knowing for sure.

Firstly, I backtest it. If that passes, then I can SIM trade it and if that passes I can finally trade it with real money on small size.

Sounds simple, reliable and it makes sense, but there are many traders that don't do that. If they did, most of the traders wouldn't fail at trading.

We have the technology available at very low or no cost to do this. Yes, it requires effort and yes, I backtest and SIM trade many things that just don't work as I thought they would. Some only fail when I trade them with real money. But better that than throwing money away without a chance of success.

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