Here's an email that I get a lot…
“Hi Hugh,
What do you think about this trading strategy: (insert YouTube video link)? I want to know if I should start trading it.
Thanks.”
If you have ever found yourself asking this question, then this blog post is for you. I'll go over why it doesn't matter what I think and I'll show you how to get proof that the trading system works (or doesn't).
Before we get into it, let's get something straight…DO NOT trade a system you just learned in a live account yet. No matter how convincing the person in the YouTube video is, you WILL lose money.
…even if the trading system does work for them.
I know from experience and I want to save you from that fate.
Alright, here we go…
It Doesn't Matter What I Think
First of all, I get it…
There is a ton of great trading education out there on YouTube. But it can be tough to tell what works and what doesn't.
So I'm glad that you are asking someone what they think, instead of just jumping in and trading.
However, what I think about a trading system doesn't matter.
Actually, what anyone else thinks doesn't matter either.
This is because I have my own biases about trading systems and I will tend to like trading systems that match my personality.
…and it's very likely that you and I don't have the same Trading Personality. It's like we are wearing different types of glasses, when it comes to trading systems.
We will see things in a different way.
The same goes for anyone else you ask. They might be a successful trader and they can certainly give you some valuable feedback.
But at the end of the day, you have to try things out for yourself and collect your own data.
Here's how to do that…
How to Get Proof That YouTube Forex Trading Strategies Work
So any time that you learn a trading system on YouTube, you should do two things first. Anyone can do this and it will give you infinitely better answers than asking me or anyone else on the internet.
If you cannot test the trading strategy, or you don't understand how it works, then you need to move on to another trading strategy. The best trading systems are often very simple.
…and how will you trade something that you don't understand or have confidence in?
There are plenty of great trading systems out there.
1. Backtest the Strategy
First, you should see if the trading system would have been profitable in the past. It's true that past performance doesn't guarantee future results…but it is the best predictor that I have seen.
When a trading system performs well in different market conditions, that gives it a great chance of it working in the future. Be sure to backtest it over as long a time period as possible.
…one year is not real backtesting.
You can backtest with something like Forex Tester, or you can use the free version of TradingView. I recommend Forex Tester, but if you are strapped for cash, then TradingView or MT4 still works.
It will just take you longer to go through the testing process.
Then you can upload your data into something like TradingStats. Here's and example of one of my backtests. It's totally free and is a great way to see how your system performs.
Ran out of YouTube Forex trading strategies to backtest? To get more Forex trading strategies, read this post.
To get complete tutorials on how to do this process, sign up for the Forex Trading Strategy Development Program.
Once you have backtested a trading strategy and you are satisfied with the results, you aren't done yet…
2. Forward Test the Strategy
Remember that thing about past performance not guaranteeing future results?
Well, now you are going to test how the system works in current market conditions. This will give you a better idea of how the system works right now.
This will also flush out any potential issues that you could not uncover in backtesting. For example, maybe you have a day job and cannot take all of the trading signals that your system fires off.
If that is the case, your results will probably be erratic.
Then you will have to figure out a way around this issue. You can use an alert indicator or schedule specific time intervals to check the charts.
To Forward Test that strategy, simply take that same trading plan that you used in Backtesting and trade it in a demo account. Any reputable Forex broker will give you a demo account.
A demo account will allow you to test the system in real-time, with play money.
Test the system with at least 99 trades.
Conclusion
Once a trading system performs well in Forward Testing and Backtesting, then it's up to you to decide if you should risk real money on that trading system. I can't (and won't) tell you when you should risk your hard-earned cashola.
But if you follow this process, you will have a much more educated answer.
Does that seem too much like work? Yes, it is hard work and if you are not willing to do that, then trading is probably not for you.
Just being real.
Do you think LeBron James wins NBA championships by watching YouTube videos? Hell no, he has to work for it.
…so do you.
If you need more help with this process, join our Trading Strategy Development community.
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