[00:00] Hello friends and welcome back to the channel. Today we're doing some more backtesting. You guys seemed to really like it last time, so I'm going to do some more of it. And we had a special request to do some backtesting specifically on the one and only XAUUSD.
[00:13] You guys already know this is probably the most popular trading market, at least from what I can tell from my channel. People seem to really love XAUUSD because of the high volatility. So in today's video, we're going to be backtesting a simple strategy and seeing how it does on gold.
[00:27] Now, this is stuff that I don't know. I've gone to a random portion of the data, and we're going to let this thing unfold. I'm using the replay function on TradingView.com. This is a – the premium version has access to this. So if you don't have premium, then you can check them out if you would like.
[00:41] I have free access to this, low-key kind of a perk because I have the YouTube channel. They hooked me up with a free premium version, which is kind of awesome. And the premium version is awesome. But anyway, we are specifically doing the gold market on the four-hour chart.
[00:55] I've scrolled back to a random period of time. I'm not even sure what year this is. And then finally, I am looking for a couple different rule filters to enter and exit trades. And we're going to be recording the progress or the profitability of this strategy for a couple trades
[01:10] just to show you guys how generally backtesting works. Okay, so the filters that we are doing, a little bit different than last time. Last time, we did something similar, but I'll show you the differences. If you watched the last video, we used the same concept, three moving averages trending.
[01:24] So this is an example of three moving averages to the downside. We're using the 200, the 100, and the 50. And then we are also going to be using this RSI down here at the bottom to add in a filter of overbought or oversold.
[01:38] We're using a 7-period RSI. We're using an overbought and oversold reading of 70 and 30. And then for the stop loss, we are going to be using price action. And I'm going to make that more clear what I mean by that once we get into this. But I'm going to be using structure to place the proper stop losses or the best stop losses that I can be using.
[01:54] And then I'm going to be risking 1% in this video, and different to last time, I'm actually going to be looking to make 3% on my winners, which is more than last time. Last time we tried 2 to 1, that seemed to work pretty well, but now we're going to try and do 3% to see if that does better.
[02:08] And then finally, we're not going to actually set any break-even trades. So we're going to let trades run to either profitability or to a loss. And then finally, what I'm going to do here is I'm going to just record everything in a little notepad thing here.
[02:22] So we're just going to test this profitability. Again, we're going to let the data roll in, and we are going to see how this goes. Now, the first thing I should say is remember our criteria for an entry. So you're going to see it a couple times here.
[02:35] So what I mean by criteria for an entry is, remember, we need to see all three moving averages lining up, and we need to see the RSI coming into a oversold or overbought reading. In fact, here is an example right now as we speak.
[02:49] Let's scroll in here and see if we can make some reason of this. So it does look like price has actually changed directions here. We've shown some strength to the upside. And now we see, in fact, our rules are met. We have all three moving averages lining up to the upside.
[03:02] So we do have a trending upward market by, you know, as compared to our rules. And then finally, we also have an oversold reading on the RSI. So this constitutes an entry for my strategy here that we are trying to back tap.
[03:15] So let's go ahead and do this. Okay, so we have just entered into this position. what I'm going to do is I'm actually going to set a stop-lock. Again, remember I said I'm going to use price action, basically. I like this area as a potential sort of last stand for bulls. So,
[03:30] in this case, I'm going to be risking right there. And then I'm going to be looking for, again, we're going for three to one. If this plays out, then that would be absolutely brilliant. But we will have to see, as I don't know what's going to happen next. So, we'll go ahead and go forward
[03:44] here a little bit and see how this trade would have done here starting off well let's see if we can get looks like we're back to break even and again the whole point with backtesting here is to basically take an idea and throw it at
[03:58] the data and see how it would have done so in this case there it is we are down 1% to start out the backtesting so we just record that and we don't get emotional we don't freak out let's just keep going right so let's go ahead and
[04:11] do this. So now we are no longer in a good trending market according to our rules. We're waiting for the moving averages to all line up again. Let's see if we can get that status back
[04:23] in. Okay, looks like we are almost there. We need that green to come up above the red line. Oh, well, maybe. So and again, this is partially why I like to wait for those moving averages to line up.
[04:36] Looks like the market is sort of just in a little bit of a range down situation. So until we get lined up we are going to wait and wait and see what we get okay so it looks like we may be there it is okay we are now currently trending so now remember part two we're looking for a dip to try
[04:53] and buy into this upward trend let's see how it goes uh do we get the dip i'm going to go bar by bar here because it looks like we're getting close oh maybe not uh let's go ahead and just wait here very very close i'm watching right here to see if this is how it goes uh so we are okay
[05:11] And there it is. Okay, this is our first chance to enter. So here's what I'm going to do. I'm going to take a long position again. And in this case, I'm going to be using, again, a long position filter. So what I'll do here is we are now into the trade.
[05:24] I'm going to stop out just below structure here. This seems like a very logical place. We've got some support there. And if price goes back underneath there, I probably want to get out. So, again, according to our rules, we're going to be going for a 3 to 1,
[05:36] which is a pretty big profit target relative to our possible loss. But we're going to see what happens. Let's see if we get any luck here on this position. Oh, okay. Oh, and out.
[05:49] So now we just have to go back, update again. We'll go ahead and do minus 1% again. And now it is back to the drawing board. So that one didn't work out either.
[06:01] Now we no longer have the moving averages lining up. And so we just have to play the patient game again. And this, you guys, is pretty much a raw look at what backtesting really looks like. You know, you're just sort of running the test over and over, and sometimes you're going
[06:18] to have to experience situations where you take multiple losses in a row, and that's the whole point of backtesting. It's good that we're doing this on a test and not real money, right? That's the whole idea behind taking the time to sort of do some backtesting here on the
[06:31] chart. what we doing now is we do have a downtrend filter now so we are trending to the downside according to our rules but we waiting for Was that a reading Dang it that was a reading and I completely missed it
[06:44] I'm not going to pretend to take that trade, even though, please, don't make me look silly. If it, you know... It looks like we had a pretty decent idea there, or a decent setup, but...
[06:56] That one, I can't tell if that's over or not. It may have been. I believe that is, I'm not going to say it is because I'm not sure. I don't think it is, so we're just going to ignore those two trade setups,
[07:09] even though they look fairly good here. We're going to look for a chance to enter, but we've got to wait for the signal to come. So, again, we're trending down. And, again, this is also part of the thing about backpicking is, like, if you're doing it manually, you're going to make mistakes, right?
[07:23] So you can do it in an automated fashion. Some people use MT4. I've done that in the past. Okay, there's the signal. We are actually going to take this short position now. So let's do this. We are in the trade here.
[07:35] We're going to use stop loss here. Let's go ahead and put price just above there. And then we are again looking for 3 to 1 on this trade. So let's do 3 to 1. Now we're going to just see if we can get some profit on this position.
[07:51] Nope. The market said nope. But to be fair, this is what happens when you go for a 3 to 1. You can see we were in profit there. And, you know, maybe we should have taken profit sooner. It's a little bit tough to tell.
[08:04] But, again, hindsight is 20-20. The idea here being, though, this is the whole point of testing. I don't know if this is going to be a super profitable back test or, you know, if it's going to be a terrible one. That's the whole point of testing these concepts.
[08:16] Okay, so let's see if we can get another entry. So are we trending? Yes, but we are awfully close to no longer being trending. and we need an overbought reading before we can enter.
[08:30] So, okay, there's an overbought reading, but the moving averages are not lining up. So, there was no entry there. And again, volatility seems like it's really, really dried up here. We've gone very quiet on this move, so we're just going to sit tight and wait patiently.
[08:45] We don't really quite have a trending market just yet, so I am going to go ahead and wait for these moving averages to sort of filter themselves out. Okay, there we go. Now we are starting to show some momentum to the upside. Let's see if we can get a trade. Okay, bam
[08:58] We're gonna take this long right here So again stepping up to the plate for another stop-loss possibly But again, we will see if we can catch a trade here. So there's where I'm going to go for it
[09:10] So I'm going to use this structure here as my stop-loss. We're gonna let this thing run see if we can catch a winner Looking like it's trying to get it was pretty close to stopping us out. We are very slightly in profit
[09:22] Let's see if we can get anything on this trade. Okay, looking good. And holding, holding, holding. Looks good. Let's see if we can get a full hit on the take profit.
[09:35] Close. And there it is. Okay, so I want to show you guys this. So we just took a plus 3% on this trade. So that actually brings us to break even, just with one.
[09:47] So we actually lost three and won just one. So that means that we had a 25% win rate so far, and we would have been, in this backtest, actually at a break-even.
[09:59] So I know it's not great. We're not in profit or anything. But we're in a situation where, hey, at least we are not down money on this theoretical backtest. Okay, trending really nicely here. No chance yet for a...
[10:12] Oh, there it is. Okay, we are back into the trade. Looking to be long. I actually really like this setup. So let's see if I would get smoked if I was to take this in real life. I would actually probably take something like this,
[10:24] especially if things look fundamentally good for gold, which is something I'm leaving out of these back tests and actually something very important to my real trading. So just something to note there. Fundamentals are a fundamental analysis of studying things like the latest development news-wise,
[10:39] economic data, things like that, which I do in all my real trading. So we'll see how this plays out. Right now we are focusing solely on technical analysis, and we are trying to trend higher here.
[10:54] Let's see if we can make a break. It's struggling, but it's doing its thing. Again, these are four-hour bars, so this would be a couple days of data already. And look at that. Look at that, you guys.
[11:06] We are now up 3%, just like that, right? You experienced a little bit of drawdown. That's three trades in a row where you're sitting there kind of frustrated and then, bam, two winners in a row. Not bad at all.
[11:18] just going with the flow here on the gold market. So, I don't know. By the way, if you made it this far in the video, comment down below. You guys are the real ones. I always appreciate you guys who hang out with me towards the end of the videos. But I do also want to say something here.
[11:31] With this gold trade, with one trade, sorry, with two trades, we were able to bring this backtesting from the debt, right, down 3%, which is actually not that bad. But, you know,
[11:43] not a great backtest into a profitable one, just really quick. And that is the power of letting these winners be really big relative to a fairly small stop loss. So, you know, kind of an interesting concept here so far.
[11:58] What we're going to do is we're going to keep going. We're going to take some more trades and see if we can catch anything else. I'll just let it play out. We're looking for an oversold reading because we still are trending nicely, but we would like to see some form of an oversold reading.
[12:13] It looks like we're getting close. Let me see if we can. I'm just going to go one bar at a time. Close. We had some intraday action there. Maybe the signal was... That's something we're also leaving out. We're leaving intracandle testing in this
[12:27] out, which is not ideal, but oh, there's an entry. Let's take our trade. Okay, so I'm going to take my trade here. Stop loss. Let's think about this. So it does seem like we have, of course,
[12:41] structure where we currently sit, which makes it really nice. I actually really like that for potential just long side bias and then I like the idea of putting my stop underneath this swing low because I really don't want to see the thing make a lower low so in that case what we will do is we'll actually sight target three to one again
[12:57] right again sticking to the rules we follow the rules in this building so we will keep going along with this and see how it goes from here okay so we're floating at this point just a little bit worse than one arc and back to break even and stopped out question mark what
[13:22] in the world look at that you guys look our stop-loss placement not gonna lie was kind of spot-on let's see if we can stay in the trade though it might still roll over and knock us out looking like it might there it is okay
[13:37] Stopped out. So it teased us. It teased us. But either way, still all right. So price did come back, hit us for a stop loss. We are now flirting 2% profit. And so we can just keep going along.
[13:52] Now, one thing that I'm also pointing out with these backtests is this is like really, really sort of basic backtesting. We're not accounting for everything that we probably should in a really thorough backtest.
[14:04] Some of those things, for example, are like your max drawdown, right? We should probably record the worst things got. So right now we face a 3% max drawdown on the account for a floating gain of 2%, right?
[14:20] So not the best so far, but this is the whole point with backlinks. There's a whole list of things that you can record and study sort of to show the results of backlinking.
[14:32] It's not just how much did it make. Because, you know, it's really sort of dependent on how much you brought in on the back test, but also on how much drawdown you experienced to make those gains.
[14:45] That's a really big thing to consider. Okay, so we are sort of mixed on the moving averages here. Things are not super clean. I'm watching here. It does look like we are now in a sell trend, possible sell trend.
[14:59] Oh, and look at this. We are actually going to take this sell. So now we've got a short position on. And what I'm going to do here is I'm going to put my stop loss above this area fairly tight. And what we're going to do is we're going to go for our 3 to 1,
[15:13] which brings us just down to some pretty interesting structure right around here. So we'll see if this one can play out. So now we have met the entry criteria yet again for a short setup.
[15:25] So let's see how this one wants to go. So, we'll just go forward a little bit here and let's see what it does. Pretty close to getting stopped out and stopped out.
[15:39] Okay. Minus 1% on the old just updated the back test here or the log. And again, we just rinse and repeat. You guys, like I said, this video is not super well edited, not super, you know, in depth.
[15:55] It's literally just me recording my session here testing this concept. So the moving average is not yet lined up. We're looking for momentum to sort of pick up on these markets before we jump into anything. Let's see if we can get...
[16:08] Look at those moving averages. They're really just like bundled right now. Okay, we have started to form some momentum to the upside. Let's see if we can get an oversold reading. We are... Look at how high. That moving...
[16:20] That RSI hit up to 94.95. That's crazy. Okay, so we're looking for oversold status. Can we get it? Can we get some oversold status here? Not quite. There it is. Okay, jumping into the trade
[16:38] here on the long side this time. Back to looking for long. What we're gonna do is I'm gonna put my stop underneath structure here. I'm gonna go for a little bit more here on this trade. The reason there is just because I don't see any
[16:50] clear levels of support here. You kind of have this to be fair, so I guess we could tighten this up a little bit. Maybe I will do that actually. So I've got some structure here that I like. So you've got 1260, which looks like a pretty good number. And then you've got possibly just enough
[17:05] stop loss to put it right around here underneath that swing. So I think that that's reasonable. So this is our three to one. We'll go right there. And let's see if we can get stopped out. I mean,
[17:17] take profits. Seems like the only thing with these high-risk rewards is that when you go for quite a bit in the market you inevitably take a lot of small losses or you know relatively small compared to the win when things do
[17:33] not go the right direction. So there it is another loss and we are sitting what are we at? Minus three plus six minus three we are flat. So after everything things said and done. So far, not going super well. Maybe the 2-1 would have been a little
[17:49] bit better, but again, this is why we backed us. We don't know what's going to happen. All we can do is look to take the setups and see how they will perform so that we can make a better decision about the strategy we're using. But this is the thing. Most people
[18:04] don't even do anything like this. So they're just sort of, okay, we're going to take this trade. So they're mostly, before I keep going, they're mostly just taking trades without having done any sort of testing of what they're doing and it's really quite
[18:17] important in my view. Okay so let's let's clear some of these support levels as well and then we'll talk about structure. So price is moving down you do have a nice little overall movement momentum to the downside we're looking for some kind
[18:32] of lower high here what I'm going to do is I'm going to set my target here there's three to one just barely so this is pretty close we're going to just use
[18:48] this area price comes back up there then maybe the uptrend is back in town we'll see break even and stopped out okay so now we are at minus one percent on the
[19:03] thing and again like I said this is not an edited video it's not beautiful it's not you know a really exciting video this is what you know hopefully you guys get value out of it's just the real stuff of trading so it's not always so
[19:17] easy and glorious but we will continue on and see if we can catch any more good trades here they will do two more trades and see how it goes okay so moving averages are lined up we are oversold I'm actually going to take this position
[19:30] here to a long time we've seen momentum pick up enough here that the moving averages have lined up we're going to put stop underneath this previous one low so just a bit more here and then we're gonna go for our standard beloved
[19:44] three let see how it goes whoa look at that candle you guys that a four hour What is that That is just a casual 850 pips in four hours That must have been like a big NFP news or something
[20:01] but either way, that puts us back up into profit. Not bad. Again, we'll do one more trade like I said we would. So what is that? So let's tally up where we're at currently.
[20:13] So we have done three losses, and then we had two wins, so that put us at plus three. Then we lost three, so we're at flat. Minus one, plus three. So we are at, if my math is correct, plus 2%.
[20:25] And I know it's not super glorious, but again, it's actually holding its own, and at least we're not negative after this number of trades. That's a good thing. So let's even take one more trade, and then it will decide how things are going.
[20:38] But truthfully, just before I do take this last trade, you should probably take, like, honestly, like a thousand theoretical trades before you make a really informed decision, if not more, because it takes a lot of really understanding your strategy in and out before you can truthfully go take it and put it on a live account and start trading your money on it.
[20:58] You really don't want to trade something on your money until you have a strong, strong confidence in the performance. Okay, that's... I'm gonna actually... I meant to take the trade there, and this is gonna be...
[21:12] Oh, this is conflicting. So, you know what? This is the whole point of the video. The whole point of the video here is to show you what back to the scenes is really like. So you saw me click the candle here, and I saw this candle, and I realized, hey, that's oversold enough. That would meet my
[21:26] criteria for an entry, right? But then I accidentally clicked one more and saw what happened, right? So So this is where you have to be really honest with yourself because if you had basically no knowledge of what the scandal is, you might place a different stop on.
[21:43] And again, people love to do hindsight when it comes to trading. Everyone likes to know what's going to happen, etc. I get it on my comment section all the time. So truthfully, what I should do is I should not take this trade because I know what happened, right?
[21:55] So if I was to tell you guys, hey, let me take the trade here and then place the stop loss, you know, right here and then go for this trade, then I already know what happened. I'm up in profit. So I'm going to just skip this trade.
[22:08] Maybe we'll get a tap back into an oversold status and get a chance to buy back in. Looks like it might happen. There it is. Okay, see? And the market gods rewarded us for our discipline there.
[22:20] Again, this is a YouTube video, so I want to make it look good. So there is always that tempting voice that's like, Nick. Make the trade look great so that it can be amazing, right? But, you know, when I put my stuff on my channel, my goal with you guys is just to give you no BS.
[22:34] Like, I try and keep it as real as possible. If you appreciate that, hit that like button down below. This video is running on, so if you're 22 minutes in here with me, what's up? Appreciate you being here. If you made it, you know what? We've never done this before.
[22:47] If you're this far in the video with me, let me know that you made it to the second this far. because I said it earlier, but if you made it to like towards the end of the video, say like I made it to the end, that would be awesome. Uh, and I'll try and heart your comment. I always like to do
[23:02] that. It makes my, it makes my day when I see you guys commenting that, because I know people are like taking this stuff seriously and putting in the work, uh, that is really required to, to learn this craft. Um, okay. I'm going to put my stopwatch just below here. I actually like where it is.
[23:15] Uh, we're going to go for three to one on this trade as we have done the whole time. and then we will call it a video. Let's see what happens here.
[23:27] And this is a big one, so we'll see what happens. Okay, we're bouncing back and forth. We barely missed our stop loss. Let's see what happens here.
[23:40] Look at this, you guys. The stop loss is like holding out like a champ. Let's see. Can it survive? Oh, well, we're in profit. Maybe we should just end the video now. Okay, so we're starting off.
[23:52] Look at this, you guys. This is crazy. The stop loss placement here was very, very decent so far. Okay, so at this point, we are about 50% to our take profit, just a little bit under that.
[24:04] Let's see if we can get the rest of the trade. Let's see what happens here. Oh, back to break even. So this would be a really frustrating trade, I'm not going to lie. You'd be sitting there in drawdown, then in profit, then back to break even.
[24:18] But again, let's give it time. Let's see if this trend can continue. Look at that. Up, down, up, down. Shoppy. So this is the, in my opinion, these are like the worst. These trades really, really frustrate me when they just go into Chop City and you're sitting
[24:31] there sitting at the dinner table with your fork and knife ready and you're just going hungry. Okay, let's see. Are we going to get stopped out? Are you kidding me? Okay, I don't even care if we get stopped out, Max.
[24:43] Look at how many times. one, two, three, three times where the market basically just missed our stop-loss. Okay, we are out there for the final trade. And you guys, I don't know.
[24:56] What do you think? Let me know down below in the comments what we could have tried. Maybe we'll try it again in another video. At the end of the day, we ended up only up 1% on this strategy.
[25:08] Maybe there's something better that we could have done. You guys let me know if you wanted to try certain things. Maybe I'll do more back-testing videos in the future. You guys seem to like them, and I truly enjoy doing them. I think it's kind of fun. But there we go, you guys. We took a total of 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 trades,
[25:25] which is not enough to make a full decision, right? We'd honestly want to see way more than this. But just going off of what we saw here, that was a pretty more educational VAT test, if anything else.
[25:38] You can see there's all the trades that we took, the first couple, and then we had those three losses. Two great trades on this trend and here's the sort of nature of this trade right or this style training is you're really relying on
[25:50] those big trending moments to carry you into profitability so You know maybe it's better Maybe there's more filters that we could add or something that we could do to make this a little bit more profitable To get us in on the good moves and to keep us out of the chop because as you can see
[26:04] The chop seems to be more where we're taking losses with this strategy So with that said you guys if you made the end video, let me know down below in the comment section I appreciate you being here, and we will see you back in the next one.