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What is the optimization of a trading strategy?
This is a thorough analysis of the strategy and adding missing elements. This process is purely individual. Answer yourself the question, What would you like to achieve from your trading strategy? You may want the strategy to give more signals, or you want it to work on different time frames. There are many options for optimizing strategies. The critical task is to increase the efficiency (profitability) of the trading system at a given level of risk. What is the point of increasing the number of signals if the number of false signals that will take your money will grow proportionally? It is always worth remembering that you need to engage in trading solely to make a profit and not to gain emotions.
Optimizing a strategy on Binomo Crypto IDX will be similar to optimizing signals from other assets. Let’s go through the key metrics.
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Risk/reward ratio
When trading, a strategy must achieve a certain risk/reward ratio. The reference ratio is, of course, 3:1, i.e., For every $3 profit, there should be no more than $1 loss.
To understand whether your strategy satisfies this ratio, simply divide the profit received for the selected period by the loss received for the same period. If this ratio is three or more, you have a good strategy; there is nothing to optimize in this direction. You have something to work on if the ratio is less than 3.
Pay attention to your losing trades. How confident were you in the accuracy of the strategy signals and the selected amount when you opened them? Is it possible to add a filter indicator that can reduce the number of such false signals or report increased risk so that you can reduce the entry amount? Is it possible that the indicators or patterns you are using are no longer working as well as before? A demo account is best for testing new signals.
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Number of signals per day
How satisfied are you with the number of signals received on the Crypto IDX index? – That is not an entirely correct question. If most of the signals you receive are of high quality, then quantity does not matter. We would formulate the question differently: How capable are you of processing incoming signals?
Let’s assume that your trading system gives only five signals daily, but they appear at the most inconvenient time for you – you can be at work, on a walk, on a business trip, etc. It can even lead to the psychological mistake of FOMO, where you regret missing out on profits and losing money.
Try working with timeframes. Go to a demo account and lower or, conversely, increase the selected timeframe. It is logical to assume that on lower timeframes, the number of signals in your strategy will increase, and on higher timeframes, on the contrary, it will decrease. Please pay attention to what time they arrive. This time may be optimal for you. Just remember about the risk-return ratio. Keep sight of the end goal.
Other Factors to Consider
How confident are you that you consider all the factors in your trading strategy? The chosen trading system is quite good, but some fundamental reasons are added that significantly reduce its effectiveness. Optimizing your strategy will also require taking these factors into account.
Trading Crypto IDX is dealing with a relatively mobile and exciting instrument. Choose a strategy for this instrument that suits your temperament and trading style.
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