Adrian Reid walks through a linear back-testing checklist that forces a final trade-or-don't-trade decision and stops endless tinkering. He recommends risking only a fraction of your account on any single system, like $10,000 of $100,000, and running many small systems instead of betting everything on one.
$10,000 (vs. not trading it with $100,000)
I've developed the back testing process, which is a once through process which means you don't endlessly loop and investigate. You basically get to the end. It's like there's a, there's a trade or don't trade decision. And having that step by step process to follow, which at the end, if the system is good enough, you trade it, if it's not, you throw it away, is, is really powerful because it allows you to.
Do the work, tick off all of the steps in a checklist. And when you get to the end, if it's good enough, then you go, you don't need to kind of keep going back and going back and going back. It's a linear process and I think that's really powerful. Combined with the fact that you don't have to trade like your whole life. Saving your whole, you know, future wealth isn't going to be dependent on that one strategy. You're going to have multiple strategies. And so if you've got, let's say you had a hundred thousand dollars in your account, you might be confident enough to trade that strategy with $10,000. You might not be confident enough to trade it with a hundred thousand dollars. And that's good because you shouldn't anyway. But getting off that analysis wheel that, that, you know, that rat race sort of wheel of endlessly analyzing, a lot of it is about reducing the risk, reducing the exposure to a point that you're comfortable to go live with that strategy.
So I really like the diversified approach that we use because it makes it easier to get in because you're only using a small amount of your money on each individual system.
