I got this interesting question about trading strategies today…
It was about the Rounder Breakout Strategy I shared on the BTA YouTube channel a while ago.
The question said:
Now that’s a great question!
And the difference may sound small, but it can have a MEGA impact on trading results.
So, “model” or “real” strategy – which one wins?
Well, here’s the difference:
A model strategy hasn’t passed robustness testing yet.
The model strategy MAY show a potential edge, and it MAY be viable to trade, but we just don’t know.
We can’t be confident in it yet, because we haven’t truly tested it.
For a model strategy to graduate to “final strategy” status, it needs to pass each layer of robustness testing.
And this is where many traders go wrong.
I’ve seen traders find a trading idea in a book or on the internet and code it up to see if it’s profitable. They see the strategy made some profits, count all the money they could have been making, order their lambo and start trading it.
But at this stage, it’s NOT even a real strategy.
It’s a model strategy with potential.
That’s it.
It’s easy to create lots of model trading strategies, however, not all are suitable for live trading. I’ve seen plenty of model strategies fall apart during robustness testing too, so it’s important to be able to:
- Generate lots of trading models fast
- Use robustness testing procedures to separate the good from the bad.
Both steps are important.
Miss these steps, and you’re basically trading blind. Ouch.
Now…
Robustness testing is critical.
It’s one of the keys to successful trading, and such an important part of the Mr Breakouts Formula too. Skip robustness testing and you could be in for trouble.
NEVER trade a model strategy without doing the robustness checks first.
It could save your trading account!
