Updated: Jun 9
You've built strategies and you think that it will be profitable throughout the whole time❓
However, after a year begins to lose and you do not know why❓
I have to worry you😦, the "vitality" of your strategy is over.
This is because the forex market changes over time and what was profitable a year ago is losing today.
What can you do in this situation❓ I have two options for you
1. exclude strategies from use and replace them with new, profitable ones.
2 optimize the parameters of the strategy taking into account the last year.
Now you know the reasons why the strategy requires periodic adjustment or exclusion from trading, but do you know when to do it? I have you a very simple, free solution that does not require software or other complicated things.
This simple way is to use the factor😊
As you know, the creation of backtests is the result of a simulation, so it is worth assuming a certain margin of error in calculating the maximum decrease in the value of the so-called DD.
You can use the following formula to calculate the new value
(Max DD x factor) + Max DD
For example, if the calculated max DD strategy is 946 pips and your ratio is 10%
( 946 x 10 %) + 946 = 1040,6
1040.6 is the new max DD value for your strategy at which you optimize or disable strategy.
The coefficient is set individually by you, if you want to react faster to a decrease in strategy profitability, use a lower coefficient, e.g. 10%. The higher the coefficient, the greater tolerance to max DD strategy.
I hope that the above article will help you invest even better in the forex market😊