Yesterday was another slow day in the market. Seems like this entire week has been slow to me, but that usually happens after an action packed week.  A good thing about a slow day is that it frees up time for me to get some back-testing done. (For those who are unfamiliar with back-testing, it's when a technical analysis trader takes his/her strategy or system and goes back through historical charts and tests it). My day trading strategy uses a 15min chart so I usually like to go back a year, but for those who use higher timeframes I would go as far back as you can. A few things I like to look for in my back-testing are  1)Profit  2) Draw-down and 3)

Win percentage.  Profit is important for obvious reasons; I want to see if the pair I'm testing is profitable or not. Next I look at draw-down. Not only do I want to see how much I average on a loss, to make sure I don't blow out my account, but I also want to make sure that a particular month doesn't clean out the earnings of another.  Personally I don't like to see more than 2 losing months in a row and if I more than four losing months throughout the year then I usually stop testing the pair and move on to another.  Lastly I look at my win percentage.  I like to look at this statistic in order to give me a confidence and calmness when I trade. If I know that my win percentage on the EUR/USD is 50%. Then I know that after a few winners, a loss is bound to come. That way when the loss does come I'm not in shock or upset, because it was expected.

Now for the lesson well learned.  It is important that you finish what you start. I recently back-tested a pair that looked very very promising through the first 9 months of testing it. I was honestly very excited and was seriously thinking about just adding the pair to my portfolio and trading it with real money. Then a little voice in my head (my trading mentor Jason Stapleton from told me to finish the entire year first. I did so and the last 3 months went horrible. My losses is those final months completely wiped out everything I had earned during the year. I'm not sure how the pair is doing now, but after seeing that, I knew it was something that I didn't want to get involved in.