So, the thing about discretionary trading is that because as discretionary trader, we are really flexible with what the market tells us, which means that when market conditions change, when the edge changes, as discretionary trader, you should be able to see that happening over time. Alright? So, I will say that the backtesting part for discretionary trader is that when you look at enough charts, you have enough experience, you will realize or you’ll be able to realize when market condition changes.
Okay, so when market condition change, this is where it causes a lot of pure systematic trader. I want to know trader to hit a bad patch because when they use algorithms, they can’t really see how the market is changing, where the market is changing or not. But as a visual treat, visual trader, right? If you look at a market all the time, you’ll be able to see, oh, when the market is trending, when the market is going sideways, when a market is actually heading down.
Alright, so either systematic trading or algorithm trading you can, you can see that, you can only… once you start seeing losses then you have to go back and look and say, “oh, okay, market condition has changed.” Now I use another set of algorithm. So you kept the changing algorithm only ways to incurring losses. So for discretionary trader, I would say the way we backtest is that we just look at the past price action and see if the methodology that you use happens frequent enough for that particular chart that you look at or for the particular market that you look at.
And then what I will do is usually I will just follow test, and follow test and to see whether that, what’s that generates a positive expectancy or R-Multiples for me based on the strategy that I look at.
Interested to receive mentorship opportunities like this with Philip?
Find out more at traderwave.com/innercircle
- How To Build The Discipline Of Following Your Trading Plan - May 28, 2020
- How To Overcome The Issue Of Cutting Loss Too Late - May 26, 2020
- How To Draw Steeper Trend Lines In A Parabolic Move - May 23, 2020