Forex Strategies Selection

Forex strategies selection problem can literally become a million dollar question. How to find the best trading strategy? Or at least the one that works. This would already be enough.

We don’t have to get a strategy that will be profitable all of the time. That would be ideal, but is is impossible. However, we can analyze and identify the areas where certain strategy works and collect statistics.

But how should we do strategies selection in practice? Obviously, “trial and error” approach will lead us nowhere. The number of options is infinite. To get results in reasonable time, we need a method.

Natural Forex Strategies Selection

Can we apply the evolution principles to Forex strategies selection?

We can take a number of strategies, and a set of the test scenarios. We run all the scenarios for all strategies and compare the results. After that, we select only the best strategies and only the most difficult test cases.

Then, we analyze the test results and make enhancememnts to the strategies that performed the best. In addition, new market data is analyzed and new test scenarios are added to the existing set. Then the test cycle repeats.

This model is difficult to apply without automated trading environment. For that, we need to use adequate method of presenting forex strattegy.  Each trading strategy should be a unique combination of trading logic and parameters.

Next, the strategy description formalism should provide a mechanism to make changes in the strategies as easy as only possible, without need to do coding. We use the Forex strategy description based on state machines – this is one example of how it is possible.

And the most important part in the evolution model is to be able to merge strategies. Meaning that we can easily run multiple strategies as one. Our state machine based strategy description  is suited well for strategy merging, as well.

Forex strategies selection in the above model is impossible without testing tools. We use our proprietory software – Forex strategy tester, which is designed to run multiple strategies against the multitude of test scenarios.