Saturday, 17 December 2016

Why you need a trade simulator

     As traders we all have our systems. Our systems are (hopefully) what governs our trading; a clear set of rules and parameters that tell us when and how to enter, and more importantly exit our position. It is only by developing and optimizing, and then not deviating from these parameters that we can succeed. Unfortunately many novice traders focus almost exclusively on the entry side of the equation and neglect the vastly more important aspects of sizing and exit strategy. This is where our trade simulator comes in. Again, if the amateur even gets this far he focuses all of his attention on testing his entry strategy; sometimes importing historical data and back testing his rules. Contrast this with the approach of the pros and more seasoned traders who run endless simulations and models; focusing instead on exit strategies and testing their systems in all market conditions. It used to be that only large institutions with vast resources and supercomputers could do this. Fortunately now, we all have right in front of us the tools to do this. Armed with your PC and a simple spreadsheet you too can run thousands of simulations in minutes and test a myriad of conditions. Then you will see your system as a statistician does, and can begin to truly optimize it to maximize profits in the long term where it really counts.

Check out our video series on building and running a simple, spreadsheet based simulator:

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