Trader Dale Volume Profile
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Backtesting & getting started<br />
to look into it any longer. If this phase looks promising you can move into phase 2. If not, then<br />
make some changes (changes that come to your mind when backtesting) to it and try the rough<br />
backtest again. If you see that this idea is no good at all, just let it go.<br />
Phase 2: Thorough backtest<br />
Now you have some very rough backtest that says that it won't be a<br />
complete waste of time to do a thorough analysis and backtesting. In<br />
this phase, you want to be much more precise and take into account all<br />
sorts of rules, confluences, and exceptions that occur in your trading.<br />
You also want to backtest this idea on more trades and at more different<br />
markets, possibly with more different settings.<br />
This phase it about your preferences and how much elaborate (and<br />
time-consuming) you want to make it. You need to realize though that<br />
it is only a backtest. It will never be like a real trading no matter how<br />
much you try and how much time it takes. Even a thorough backtest<br />
won’t show you for sure whether your new method will be profitable or<br />
not.<br />
Even a thorough<br />
backtest won’t<br />
tell you for sure if<br />
your new method<br />
will be profitable<br />
or not.<br />
You need to accept this. I had several systems that had over 70 % winning in a thorough backtest<br />
and then failed when I traded them on my real account. You may say that it makes no sense but<br />
it is the truth. I am sure you have your own, similar experience.<br />
If your new strategy seems profitable after a thorough backtest you can move into Phase 3. If not<br />
I suggest you think about your strategy and make some changes. Don't discard it! It passed<br />
through a rough backtest, there is still hope it could work if you make some adjustments. After<br />
you made these adjustments, repeat the thorough backtest again with these adjustments. If it<br />
fails again, give it a few more tries. Only after that, I suggest you leave this strategy be. I also<br />
suggest you keep your old backtests, even the ones that didn't go well. You may have a great idea<br />
on how to upgrade/adjust them in the future.<br />
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