How do you evaluate a new setup idea?

New ideas arrive constantly — from books, forums, other traders. Most die in testing, and the evaluation process decides which ones get your time. The disciplined version: write the rules, backtest, forward test, then maybe trade small.

How do you evaluate a new setup idea? — risk-reward diagram
A risk-reward ratio of 1 to 2

What's your funnel?

  • how you screen ideas before testing
  • the minimum evidence before live money
  • an idea that passed or failed spectacularly
How do you evaluate a new setup idea? — moving average crossover diagram
A fast moving average crossing a slower one

The expectancy guide gives the acceptance criteria.

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