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Do you know how much risk you are taking?


Trading is endlessly fascinating. The longer we trade a strategy, the more we learn about it. We find out which market conditions are helpful and which are not. 

We learn how we react to our strategy. The times when we love our strategy - usually when we are winning! And the times when we hate it. 

It is these extremes of the emotional reactions that cause problems. When we love our strategy we can be tempted to take on too much risk. When we hate our strategy we interfere with it, not taking entries or abandoning it altogether.

We can reduce these emotional fluctuations by understanding our strategy better.  The longer we trade a strategy, the more we accept the good and bad aspects of it. We also learn more about the markets we trade.

 

Real-time happens slowly


The best way to understand a trading strategy is to trade it for 20 years - unfortunately, most of us don't have the time, money or patience to wait that long.

The next best option is to carry out good quality backtesting. I don't just use backtesting to develop new strategies. I use backtesting to refine and also to get to know my strategies better.

I also do a lot of simpler testing to analyse market behaviour in certain circumstances. For example: comparing volatile markets to calm markets and bull markets to bears.
 

New: Tradinformed Backtesting Group


I am putting a new group together to guide the development of the next generation of Tradinformed Backtest Models. Members of the group will have the chance to see early versions of the new models and work with me to make them more powerful and useful.

Members will also have a chance to improve their backtesting skills and interact with other traders who are interested in backtesting.

If you want to learn more email me here: mark@tradinformed.com

 

Use Monte Carlo methods to reduce our risk


How we manage risk makes the difference between traders and gamblers. 

One way to test the robustness of your strategy is to use a Monte Carlo Simulator. This re-arranges the order of the trades to identify a worst-case scenario.

I have developed a simple to use Excel version that is available in the Tradinformed Shop.

You can see it here: Tradinformed Monte Carlo Simulator
 
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