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I TESTED a 100% WIN RATE Trading Strategy with RSI Indicator - MUST WATCH VIDEO 馃槻 - YouTube
Channel: Trading Strategy Testing
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what if we try a so-called 100 win rate
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strategy together with the rsi indicator
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that's what we're going to explore today
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so make sure to read the following
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disclaimer and let's give this strategy
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a shot
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hi traders well do you believe in a
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trading strategy that works all the time
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i don't but according to basic
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probability rules that's possible
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but how
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let me give you an example let's say you
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decide to play a game with your friend
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using a coin
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there are two rules for this game you'll
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flip the coin and if it's tails your
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friend will give you a dollar
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otherwise you need to give a dollar to
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your friend
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so you are risking one dollar in every
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single round
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that's the first rule but what about the
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second one
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well you can play as long as you want to
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but if you lose the risk goes up to two
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dollars
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if you lose again the amount goes to
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four dollars then 8
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16 32
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etc whenever you lose a round the
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following one will have two times the
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previous risk
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this is the martingale system
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let's suppose that you have ten thousand
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dollars that you can afford to risk in
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this game
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if we do some basic calculations we can
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realize that the only way to lose the
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entire 10 000
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is if we lose 14 times in a row
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but imagine if we change the game a bit
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and begin with one cent risk instead of
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one dollar well the profit we'll make
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will decrease for sure but we'll have
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more chances to make a profit and
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recover our loss
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the only way to go bankrupt in this
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scenario is if we lose 20 rounds in a
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row
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for a game where we have a 50 50 chance
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to win we need to be extremely unlucky
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to go bankrupt
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to sum up the concept of martingale is
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pretty simple you increase your bet
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after every loss
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so when you eventually win you get your
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lost money back and start betting with
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the initial amount again
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it seems quite logical and is fairly
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easy to understand and implement
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no need to be a math wizard or strategic
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mastermind to use this system
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does that remind you of anything
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well let's say forex trading for example
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there are only two possibilities
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regarding the price movement it could go
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up or go down
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we can either buy or sell
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the same thing applies when we think of
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the coin flipping experience
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so what happens if we use the martingale
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concept to trade forex and use an rsi
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trading strategy to boost up the chances
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of being on the right side of the market
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so we go in when the rsi indicator gives
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us a buy or sell signal and we'll double
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our bet or trade size every time we have
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a loser
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as we continue losing we continue
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doubling the trade sizes until we exit
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the trades with profit
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for example we go short with one
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standard lot if the price goes against
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us we immediately place a sell trade
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with a volume of two standard lots if
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the trend continues moving against us we
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go short again with four standard lots
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eventually that would probably take some
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time but if we continually double our
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bet or trade sizes all we'll need is one
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winner to get back to profits
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this will require a lot of automation
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which is why we'll use an expert advisor
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built according to this strategy
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before we begin back testing let's
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review the setup again so we will use
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the rsi indicator to enter the market
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i'm sure some of you have watched the
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video where we back tested the rsi
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trading strategy 100 times
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i'll leave a link to that video at the
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end of this one
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but to sum up the rsi indicator has
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three signal levels
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30 50 and 70. the area above 70 is
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called the overbought area which is
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where we should sell
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on the other hand the area below 30 is
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the oversold zone where we should buy
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that will increase the quality of our
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entries
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this is our expert advisor i'll set it
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to 5 minutes to get as many trades as
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possible the most important element here
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is the initial balance
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we'll run this strategy with a ten
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thousand dollar balance and place both
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buy and sell entries
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no worries we'll do the same thing with
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one thousand dollars and one hundred
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dollars as some subscribers want us to
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back test strategies using smaller
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accounts
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let's look at the other settings
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to remain longer in the market i'll use
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a volume size of 1 micro lot and opt for
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70 pips as a fixed take profit
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regarding the rsi indicator settings
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i'll stick to the 14 periods and go
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short when the price goes above 70 and
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buy when the price crosses below level
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30.
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one more thing before we hit on start
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i'll select a one year time interval
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that's pretty much it let's hit on start
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while waiting for the results don't
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forget to give this video a thumbs up
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and subscribe to the channel if this is
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your first time here
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many subscribers want to learn how they
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can build an expert advisor to back test
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their trading strategy
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i'll leave you a link to a great udemy
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course that teaches you how to build an
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expert advisor from a to z
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well we have just completed the back
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testing process
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the equity has tremendously increased
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but only by looking at this i can
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imagine how high the draw down would be
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so basically the price has made a sharp
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move against us in these three instances
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and we needed to place many trades to
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recover our loss
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and yes we had a 72.02 drawdown which is
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extremely high the strategy has a
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success rate of 82.72
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which seems great doesn't it
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we ended up with a profit that exceeds
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30 000
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that's a massive return so imagine
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beginning the year with a ten thousand
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dollar account and end up with thirty
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thousand dollars
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that's probably better than any high
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yield savings accounts
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do i recommend this expert advisor or
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strategy
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well before i give you my opinion let me
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run the same test with one thousand
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dollars this time
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simply return to the expert advisor
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settings and change the balance from ten
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thousand dollars to one thousand dollars
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let's keep the other settings as they
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are and hit on start to begin the back
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testing process
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we're done now we can see that the
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balance has gradually increased but the
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equity dropped at the end of the process
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and yeah you might have guessed it right
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the drawdown is extremely high 98.2
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percent which means that trading this
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strategy with 1 000 is extremely
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dangerous and you could lose your entire
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balance if the market goes against you
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with an upward or downward spike
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if we check the trades we'll notice that
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we remained in the market for only 24
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days which was enough to wipe out our
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account
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imagine if we do the same experience
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with only 100
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we can remain in the market for how many
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days i'll let you guess i would say 5 to
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10 days maximum
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let me run the test again with a 100
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balance before i share with you my
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thoughts about this strategy
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as expected we've lost our balance at
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the end of the day despite the profit
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recorded at the beginning of the
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experience
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the drawdown is 97.35 percent
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i was wrong we remained in the market
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for 24 days
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now i would like to know what happened
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on the 23rd and 24th of september 2020
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as we wipe out our accounts on these two
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particular days
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well if we check the forex event
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calendar we can see how spicy the two
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days were
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our balance wasn't enough to sustain our
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positions during this period
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it's important to monitor the event
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calendar to avoid any negative impulses
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this strategy is not profitable the way
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it is now as it doesn't take into
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consideration the fundamental events and
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the times when the market is in high
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volatility for other reasons
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but i'm wondering what would happen if
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we try this strategy during a low
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volatility market and we avoid all major
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events
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are we going to be profitable
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let me know in the comments section if
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you want us to continue working on this
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series and feel free to suggest any idea
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you have in mind to optimize or
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challenge this strategy
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don't forget to check out the other
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videos on this channel and subscribe so
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you won't miss any updates in the future
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happy trading
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