So, I love backtesting. Recently I've found my self in a 3% drawdown and needed to figure out what the cause of it was and trading at this moment won't give me that answer.
So, I decided to backtest.
Here is what I found:
1. I'm overtrading my system
I am a proud swing trader who got back into scalping the market in December 2022. It was mot my idea, but I thought I could handle it. I started out great, but then the market reminded me why I left the lower timeframes.
2. I'm not holding my trades long enough. Thanks Prop Firms!
Since joining a prop firm my mind has been changed to holding trades for less time than I normally would. I don't mind holding trades for weeks or months, but prop firms give you time limits during evaluation periods.
That was and still is a huge adjustment for me. Being a swing trader means I have to let my profits run. So, now, I've found a prop firm that will allow me to hold my trades with no time limits.
3. Not holding trades to my weekly and monthly targets.
I need to see past my daily targets. Normally my daily risk to rewards are between 1:1 and 1:2. I'm in drawdown because I'm not recovering from my losses with these risk to rewards.
So now, I'm only taking trades with RR over 1:2 and better. This way I'm trading less, holding longer(sometimes), and getting the best bank for my buck.
Backtesting helped me see my mistakes and how to correct them. This is called fixing your strategy.
Notice how I'm not changing my strategy. I'm tweaking my strategy to fit my mental capacity and trading style.
If you find you're in a drawdown and can't see, stop trading and backtest what you're currently doing and find a way to stop the behavior thats causing your drawdown. Then, stop doing that particular thing so you can see better results.
I pray this has helped you.
Let me know your key takeaway by commenting below.
So, I decided to backtest.
Here is what I found:
1. I'm overtrading my system
I am a proud swing trader who got back into scalping the market in December 2022. It was mot my idea, but I thought I could handle it. I started out great, but then the market reminded me why I left the lower timeframes.
2. I'm not holding my trades long enough. Thanks Prop Firms!
Since joining a prop firm my mind has been changed to holding trades for less time than I normally would. I don't mind holding trades for weeks or months, but prop firms give you time limits during evaluation periods.
That was and still is a huge adjustment for me. Being a swing trader means I have to let my profits run. So, now, I've found a prop firm that will allow me to hold my trades with no time limits.
3. Not holding trades to my weekly and monthly targets.
I need to see past my daily targets. Normally my daily risk to rewards are between 1:1 and 1:2. I'm in drawdown because I'm not recovering from my losses with these risk to rewards.
So now, I'm only taking trades with RR over 1:2 and better. This way I'm trading less, holding longer(sometimes), and getting the best bank for my buck.
Backtesting helped me see my mistakes and how to correct them. This is called fixing your strategy.
Notice how I'm not changing my strategy. I'm tweaking my strategy to fit my mental capacity and trading style.
If you find you're in a drawdown and can't see, stop trading and backtest what you're currently doing and find a way to stop the behavior thats causing your drawdown. Then, stop doing that particular thing so you can see better results.
I pray this has helped you.
Let me know your key takeaway by commenting below.
