Forex trading 2019 TA/FA setups and discussion, page-122

TwoHands good pick-up, and I think Rick answered the point very well - if you establish your expectations out of backtesting and know ahead of time that such drawdown or breakeven periods can occur, it doesn't necessarily eliminate the impatience pyschology (I think you have to be an absolute robot not to feel anything when your trading is spinning its wheels or incurring a drawdown), but it does improve the comfort factor - at least in my experience it has.

I am happy to share my own example of the H12 reversal model which I traded live last year and which I started trading live with my 1st live EA in mid October. I remember the 1st week the EA made a nice profit an I thought hey this is great, but then it started to incur a drawdown and essentially sit just at/below breakeven until after christmas. The equity curve at that stage was as shown below:



As you can see from above, it made abot $300 in the 1st week, and then lost that and spent over a month under water. If I didn't have any history with the model, I wouldn't be feeling very positive about the above results at christmas time.

But I can put that in the context of 3 years of backtesting history, from which I know the maximum drawdown is 12.6% and the maximum time for drawdown is 42 trading days. If you look at the results from my manual trading of the same model last year below, the above curve fits into last year's results as shown in the curve below:



So in context, the EA started trading just before it made a new equity high for the year, and just before a 2 month consolidation period - the 2nd such period for the year (and in fact there is also a 1 month consolidation period from about trade 50-120).

Note also that last year the results stayed above the max drawdown (just above the green line at one point) and the 2 x 2 month drawdown periods were in line with the 42 trading days maximum suggested by the stats.

The EA equity curve since the start of the year (apprx trade 250 in the equity curve below) has broken out of that drawdown period, although the results are no longer totally due to the original model, since I added the 3 other EA's to the account. Having said that, the original EA has contributed about half of the gain seen since trade 250 (so the original model is just now breaking its original equity high set in the 3rd week of October).



Psychologically yes I didn't feel great about the EA results at Christmas, but I was comfortable enough because of the previous history that I understood I just needed to have the patience to let it keep running.

Cheers, Sharks