one of our subscribers has recently
submitted this simple trading strategy
let's call him ramesh
it only requires two indicators
he attached a link to a website that was
not in the english language and when i
translated it to english i realized that
this strategy is called the
life-changing fx strategy
it's supposed to work with all kinds of
financial markets including forex crypto
and stocks
well i decided to back-test it 100 times
as usual and who knows maybe my life as
a trader could change and we could use
it to make more money and double up our
financial investment
[Music]
in today's video we'll be using a new
back testing tool that makes the process
super fast and easy
we'll go over the strategy and check out
some buy and sales examples from the
chart once done we'll back test this
strategy 100 times and i'll share with
you my personal feedback
you can always submit your strategy via
our website if you want us to review it
well without further ado let's get into
it
this strategy works best on the euro usd
chart and the best part about it is the
fact that it's 100 free which means that
we don't need to purchase any indicator
or expert advisor we just need to use
two free technical indicators which are
available on all trading platforms
including tradingview and metatrader4
first we need to add two technical
indicators to our chart
the first one is the 200 exponential
moving average
by the way we're using in this video a
platform called forex tester it's a
great tool that's designed to make the
back testing process quite fast and
effective
it's a premium tool but you can get it
at a 10 discount using our promo code
you can still use the free version for
some basic back testing but i recommend
you get to the premium one as it will
save you a lot of time and so far i
haven't seen a tool that is specifically
designed to make our back testing
process easier and more flexible
the second indicator is the average
directional movement index adx
we've previously back tested this
indicator and the results were quite
good
but today we're using it together with
the 200 exponential moving average
we only need the adx line we can hide
the two other lines plus di and minus di
because we won't need them for this
strategy
to do that we just select the
transparent option
let's change the color of the adx line
to red
now let's add the two adx levels 25 and
50 to the chart
i'm going to choose the green color so
we can easily see them as we back test
this trading strategy
well the setup is simple and easy when
the adx line goes up and crosses above
25 then 50 levels we look at the chart
if the price is above the 200
exponential moving average we go long
on the other hand if the adx line
crosses above 25 and 50 levels we go
short if the price is below the 200
exponential moving average that's all
we need to run this on the 5 minute
chart
before i forget the recommended risk to
reward ratio is 1 to 1.5
basically according to ramesh we should
aim for 300 pips and the stop loss must
be positioned 200 pips away from the
entry point
to make things possible i'm going to use
a 1 000 account and stick to a fixed
volume size of 1 micro lot
let's look at some trade examples
this is the euro usd 5 minutes chart the
adx line is below the level 25.
we just need to hit space to move
forward
we can notice that the adx line has just
crossed the 25 mark
now we need to wait for the line to
cross above the level 50.
all right we have just crossed above the
50 adx level the price is above the 200
exponential moving average so we go long
we can monitor the real-time balance as
we move forward with this trade
perfect
we have just hit the take profit level
and made a thirty dollar profit
now let's look at a short setup
again we need to wait for the adx line
to cross above the 25 and then 50 levels
we can see that the price is below the
200 ema
this is enough to go short
we just hit control s or click on market
order to place our trade
this is another successful trade
well this seems to be a great strategy
right
two trades are not enough to judge
we need to begin our 100 back testing
process and analyze the final results
is this a successful strategy
keep watching to find out
before that let's create a new back
testing project
we can give it a name and choose our
initial investment i'm going to go with
one thousand dollars
we should choose an instrument and let's
select the euro usd forex pair
we can select here the testing period
i'm not sure how many entries we are
going to have so i'll play it safe and
choose a long interval
well that's it our new project is
created
now i just need to add in the indicators
we need today
i'm going to fast forward this part
don't forget to hit the thumbs up button
to help us with the youtube algorithm i
appreciate it
before we begin back testing i'm going
to set a default stop loss and take
profit levels
i don't want to do it manually every
time we place a trade forex tester
offers this quite handy feature
all right everything is set now let's
begin back testing
one thing i like about this tool is its
ability to make back testing a fun real
and easy process
for instance we just need to hit ctrl b
to go long and ctrl s to go short
space to step forward and backspace to
step backward that's all i need
we can see the real-time balance as we
progress with the back testing process
the only thing i find a bit challenging
is the need to hold the space key for
some time
especially if the price takes a long
time before it hits the take profit or
stop loss
i added a four hour chart to speed up
the process
by the way don't forget to hit the
thumbs up button if you enjoy this type
of content
it takes less than a second to do but it
helps us a lot with the youtube
algorithm
excellent we have just finished the back
testing process
let's look at the results now
we've had 100 entries over 48 months
only 36 of our 100 trades managed to hit
the take profit level
the win rate is only 36 percent that's
pretty low
the drawdown is almost 40 percent which
is unacceptable
to sum up we begin with a 1 000 balance
and we end up with 789.47
it took us four years to lose 211
dollars
i know faster ways to lose money
i think we can all agree here that this
is probably one of the worst strategies
we've ever covered on this channel
this gave me an idea
what if we do some little changes
we keep the exact same strategy but
instead of going long we go short and
vice versa
do you think the results would change
let's give it a try by the way we've
recently reached the 50 000 subscribers
mark
i'd like to thank you all for making
this happen especially for our paying
members which encourages us to make more
content in the future
all right we have just completed the
process
it took us less than 15 minutes to
complete
let's look at the results now
the success rate has significantly
increased
now we are looking at a 41 success rate
the number of consecutive losing trades
is nine which is high
glad we used a fixed volume size of one
micro lot otherwise we won't be able to
complete the 100 trades
to sum up we needed four years to make a
profit of 43.65
our little twist didn't help that much
at this stage it's safe to say that this
strategy is not recommended at least
with these settings
so ramesh i'm glad you sent us a
strategy now we all know that this is
indeed a life-changing forex strategy
let us know in the comments section if
you have any ideas on how to optimize it
and feel free to submit your personal
strategy for back testing at www dot
submit
happy trading
you