How do you test a strategy idea on demo?
A new idea deserves testing before money, but beginners often test by taking one live trade. The useful version: define the setup precisely, take at least 20-30 demo trades, and write down every result.
How do you run a test?
- how you define the setup precisely enough to repeat
- how many trades you collect before judging
- what usually kills the idea in testing
The expectancy guide tells you how to read the test results.
Background: Risk-reward ratio, win rate and expectancy: the maths behind a trading edge
A high win rate can still lose money. See how win rate and risk-reward combine into expectancy, with break-even win rates and worked examples.
What is a good risk-reward ratio in forex?
There isn't one right ratio. What matters is expectancy, the win rate and ratio together. A 1:2 ratio breaks even at about 33% winners before costs, while a 1:1 ratio needs 50%.
How do you calculate trading expectancy?
Multiply the win rate by the average win and subtract the loss rate multiplied by the average loss. Measuring wins and losses in multiples of the amount risked (R) makes the result easy to compare.
Comments
Log in to join the discussion. Comments follow the community guidelines.
Log in to commentLoading comments…