Forex SSR 4

Original post by FAM Drone

If we take a scalping system that makes a mean of twenty pips on a moneymaking trade and loses a standard thirty pips on a bad trade, with eighty percent of its trades being profitable and only twenty percent losses, this is the edge for this system:

Edge = (80% x 20 pips) – (20% x 30 pips) = 10 pips

That would be a profitable system and a really good one to use if you were interested in turning into a scalper. As an example, you could come across a system that worked the other way, with a lot of little losses, say 60% losses of ten pips each time, and then some bigger gains, making say 40 pips average profit on successful trades. For this system,

Edge = (40% x 40) – (60% x 10) = 10 pips

So these 2 very different systems have exactly the same results, and the choice on which was the best currency trading system for you’d be wholly dependent on your trading style. A good way to check this out would be to operate both systems in a demo account, say for one month each. This would give you an idea of how successful you’d be operating that system for real. Comparing with back test results for the same period would prevent you from throwing out a system simply because it happened to have a bad month.