Back testing your TA edge

[MC]

I had a question on another site about how I back tested my edge...so here goes.

First, manual back testing several years of data with the objective of killing the system not proving it.
A system is mechanical so back testing needs to be the same, no thinking "hrmmmm this looks like it might have been a signal" it either was or was not. I'm not a programmer so I did it manually, there are many good platforms you can program the back test into. Tradestation as much as they sucked as a broker for me had the most historical data and probably the best back testing. That's what I used manually was TS.

Once I had that all set and my settings dialed in to my liking I moved to forward testing. It worked and was wildly profitable on paper...BUT my mind still wouldn't let me hold the runners live.
This is still the issue I'm working on today and hope to soon overcome.

Cliffs:
Back testing is to prove the system is net profitable, and to give you the confidence to execute despite having several losers in a row. The more losers you have the closer that next trade is to being a winner and getting you back on track for net profit, assuming you keep stops small and execute them.

Forward testing on paper is to practice your system and look for fake outs of indicator breakouts etc...
There are many times where an indicator hits your level only to close below and throw a fake out so you need to feel out how real time your signals will build.

[gtcramer?]

You said you're not holding your runners, just a question but are you trading 3 contracts as suggested by Mark Douglas?

It seems once the first 2 contracts are scaled out for a small profit ($75) and you set your stop on the last contract to breakeven, what's to keep you from holding a runner? It seems you need to identify an exit like low of high period or 8ema crosses below 21ema or something similiar.

[MC]

Originally Posted by gtcramer?

You said you're not holding your runners, just a question but are you trading 3 contracts as suggested by Mark Douglas?

It seems once the first 2 contracts are scaled out for a small profit ($75) and you set your stop on the last contract to breakeven, what's to keep you from holding a runner? It seems you need to identify an exit like low of high period or 8ema crosses below 21ema or something similiar.

What's keeping me from holding the runner was outlined in a psych section post and on the main blog. The lack of ability to balance greed and fear basically.

I don't have the equity level to justify 3 lots, at least not yet.
3 lots would probably increase my feelings of greed/fear and I would probably sell quicker anyhow.

Less is more when you're working though a psychological tick IMO. There's nothing worse than putting all your highly leveraged eggs in 1 basket with a psych flaw.
If you can't do it with 2 you can't do it with 3 as I see it.

It comes down to manning up and beating my weakness. All this "I'm working on it" and "I would have made" is getting old.
There comes a time when you man up or GTFO, and going live will put me in that spot. I will be live VERY soon to see if there is any chance for manhood.

Thanks for the input though.

[gtcramer?]

Trading 2 lots can give you the same advantages with less at risk. I will probably trade 2 lots when I start trading YM again. I'm applying the "zone" principles now with options. Trading 3 contracts and scaling out. It's working good. When I build my capital I'll be trading YM. Good luck with your trading.