Like most of you, when I was a complete noob, I did a lot of demo and backtesting. I'd sit there and see all those imaginary green and red dollars, and the systems that had 90% winrates. Yet, I never made money from either. I started to stray from "playing the cards" to "playing the players". This ended up making me realize that players don't bet their entire bet in one entry, but they will more often scale in/out due to their position sizes. When they enter the market, they can move price.
This is very important to note, as demos and backtesting do not account for actual trades taking place. Buying a gazillion lots of any pair on a demo account will not show what really happens in the real world. While price may move for big accounts, we should also note that even retail traders contribute to inventory balances of their brokers. The brokers will try to match orders in house, but they will always be exposed as a broker. While a minilot may not move price, it will ultimately alter the course of price simply due to the simple fact that the fact exists. Things may not change drastically, but how can you test something which doesn't take into account your actions?
I feel like I've overlooked something, but I don't know what that could be. Anyone have any thoughts?
This is very important to note, as demos and backtesting do not account for actual trades taking place. Buying a gazillion lots of any pair on a demo account will not show what really happens in the real world. While price may move for big accounts, we should also note that even retail traders contribute to inventory balances of their brokers. The brokers will try to match orders in house, but they will always be exposed as a broker. While a minilot may not move price, it will ultimately alter the course of price simply due to the simple fact that the fact exists. Things may not change drastically, but how can you test something which doesn't take into account your actions?
I feel like I've overlooked something, but I don't know what that could be. Anyone have any thoughts?
Play the players, not the cards.