Hello Traders!  In our trading psychology series so far we have addressed the issues of internal control and also trading state management.  As experienced traders know, an inevitable and necessary aspect of trading is dealing with losses.  Obviously, our internal control and trading state are affected by losses and how we perceive them.

Failure is a good teacher only to those who possess the positive attitude that will allow them to learn the valuable lessons from their mistakes.

Despite advances in trading systems, access to more information, more powerful and faster computers, and more indicators in charting and analysis packages, the percentage of traders who are losing money is the same as it was 15 years ago–a shocking 90%!

Why is this?  The answer lies in the fact that we human beings still respond to fear and greed the same way!  Despite this fact, YOU can decide to do what others have decided not to do.

Discipline yourself in both the creation and the execution of a solid trading plan! We already know with a very high degree of certainty what happens to those who don’t!

As the saying goes, if you continue to do what you have always done you will get what you have always gotten!

So then the real question becomes simply ‘ARE YOU HAPPY with your current trading‘?

If you answered anything other than a resounding YES, then STOP TRADING IMMEDIATELY, AND GET SOME help, advice and direction from someone that has helped others do it!

The 4x Authority offers help to those who need it in the form of “The Forex Model” software.

This impeccable, proven Forex trading software comes with TWO months of live support and a membership website complete with loads of support and tools.  Traders receive a 120+ page manual, video instruction, live technical support, and instruction in trading psychology, backtesting, forward testing, and money management.

This is a COMPLETE package for an unbeatable price, designed to get you started trading the Forex, PROFITABLY!  We have many traders in the live support room trading everyday and they are very happy with the software and the support.

FYI:  the software has been actively traded for over 4 years !  This is the mark of software that is here to stay and is not some optimized “special of the month” kind of Forex software that is all too common out there.

Visit our website http://www.4xauthority.com, check out the latest “overall” performance tables and change your trading results today by purchasing the software.
To your success!

Alexander Lamm

4xAuthority.com

What is backtesting and why do you need to backtest your Forex Trading Software?

This video explores the important concept of backtesting your Forex trading system and how backtesting can be used to improve your trading results.  In a nutshell, backtesting is essential because it:

• Provides statistical evidence that the trading rules you have chosen are profitable and tradable
• Gives you the confidence required to trade the system in real-time.
• Lets you “LOCK-IN” the trading rules in every fiber of your being, so that you completely understand the rules and are able to implement them in real-time without stress, panic or confusion.
• Lastly, it lets you as a trader find possible methods of optimizing or improving on your trading rules.
  For instance, you might complete your backtesting and then SEE from the data that:
  • trading during the 8 major FOMC news events is NOT lucrative
  • trading the New York afternoon sessions is NOT worth it

What does “statistically valid” mean in backtesting?

When you backtest it is important to get enough data (called ‘sample size’) to make the testing statistically valid.   The more data that you collect, the smaller the “margin of error” is likely to be, as outlined in the table below.  Usually a sample of 100 trades per market / time frame should be sufficient; however, if you have the time and your trading system generates enough trades, then it is worth the effort to collect more data (200 trades is plenty).

How do you collect the data?

1. The first step is to open the chart you would like to backtest and make sure your chart is set up so that it displays the desired number of trades in the chart.
2. Scroll back to the beginning of the chart, AND  if you have the ability to “playback” the data as if it were happening in real-time (like in eSignal), then use this feature–it is exceptionally valuable in helping you lock in the rules and participate as if you were trading in real-time.
3. Find the first trade setup that follows your rules and record the information you collect in a spreadsheet.  Typical information that you might collect is as follows:
   Date
   Time of Entry
   Entry Price
   Signal Type (i.e. Blue dot, Red dot etc)
   Whether you bought or sold (Buy/Sell)
   Stop placement
   Stop size
   Market (i.e.   EURJPY, CHF etc)
   Method of Exit (i.e.  Stopped   or  EMA3/14 crossover  or  Trailing Stop  or Stopped Out)
   Exit Price
   Pips
   Profit / Loss
   % Change (compared with Account size)
   Growth in the account
4. Continue forward throught the charts, recording each trade while paying strict attention to the time of day. If you are a day trader make sure that you only record trades that fall inside your trading window. The whole point of the backtesting is to make it realistic and statistically viable.

What do you do after you have collected the data?

1. Look at the total growth in the account and graph it. Equity curves allow you to visually see the growth and inevitable drawdowns in the account.



2. Filter the data to see if you can improve on the profitability of the model. Spreadsheet programs let you add “filters” which allows you to narrow down the data that is displayed by simply checking or unchecking selection boxes as shown below.

What do you do after you have collected, analyzed, and filtered your data?

1. Take the time to “forward-test” your trading system. This means that you “paper-trade” or “virtual trade” your system in real time for 1-2 weeks to make sure you know how to place orders in your trading platform, and to watch the results in real-time.
2. Apply MONEY MANAGEMENT techniques to your data and ACCELERATE your trading results! Money Management refers to the process of mathematically accelerating your trading based on your results… This is CRITICAL to your success as a trader.

You will receive Money Management tools and training when you purchase the Forex Model, along with Backtesting assistance, and two MONTHS of live support.   So, not only do you receive a consistent and profitable trading system, but you also get the necessary tools and support to IMPLEMENT the system in the markets day in and day out.

Check it out:  www.4xauthority.com
To your success!

Alexander
4xAuthority.com