Is this a Successful System?

I develped an EA for MetaTrader 4 and tested it on USDCHF. The result for a 2 year period from Sep 20,04 to Sep 20, 06 with 1% VAR (Value At Risk) is as follows. If I increase the VAR to 5% the net profit will increase to over 170,000.00 USD.

Strategy Tester Report
USDCHF_Pip_Boxer

<TABLE cellSpacing=1 cellPadding=3 width=820 border=0><TBODY><TR align=left><TD colSpan=2>Symbol</TD><TD colSpan=4>USDCHF (US Dollar Vs Swiss Franc)</TD></TR><TR align=left><TD colSpan=2>Period</TD><TD colSpan=4>15 Minutes (M15) 2004.09.20 00:00 - 2006.09.20 00:00 (2004.09.20 - 2006.09.20)</TD></TR><TR align=left><TD colSpan=2>Model</TD><TD colSpan=4>Every tick (based on all available least timeframes with fractal interpolation of every tick)</TD></TR><TR align=left><TD colSpan=2>Parameters</TD><TD colSpan=4>Value_At_Risk=1%</TD></TR><TR align=left><TD colSpan=2><TR align=left><TD>Bars in test</TD><TD align=right>55987</TD><TD>Ticks modelled</TD><TD align=right>2620676</TD><TD>Modelling quality</TD><TD align=right>90.00%</TD></TR><TR height=8><TD colSpan=6></TD></TR><TR align=left><TD>Initial deposit</TD><TD align=right>10000.00</TD><TD></TD><TD align=right></TD><TD></TD><TD align=right></TD></TR><TR align=left><TD>Total net profit</TD><TD align=right>7838.19</TD><TD>Gross profit</TD><TD align=right>33759.03</TD><TD>Gross loss</TD><TD align=right>-25920.83</TD></TR><TR align=left><TD>Profit factor</TD><TD align=right>1.30</TD><TD>Expected payoff</TD><TD align=right>14.57</TD><TD></TD><TD align=right></TD></TR><TR align=left><TD>Absolute drawdown</TD><TD align=right>150.82</TD><TD>Maximal drawdown</TD><TD align=right>1509.74 (9.49%)</TD><TD>Relative drawdown</TD><TD align=right>9.49% (1509.74)</TD></TR><TR height=8><TD colSpan=6></TD></TR><TR align=left><TD>Total trades</TD><TD align=right>538</TD><TD>Short positions (won %)</TD><TD align=right>275 (65.09%)</TD><TD>Long positions (won %)</TD><TD align=right>263 (65.78%)</TD></TR><TR align=left><TD align=right colSpan=2></TD><TD>Profit trades (% of total)</TD><TD align=right>352 (65.43%)</TD><TD>Loss trades (% of total)</TD><TD align=right>186 (34.57%)</TD></TR><TR align=left><TD align=right colSpan=2>Largest</TD><TD>profit trade</TD><TD align=right>206.83</TD><TD>loss trade</TD><TD align=right>-189.51</TD></TR><TR align=left><TD align=right colSpan=2>Average</TD><TD>profit trade</TD><TD align=right>95.91</TD><TD>loss trade</TD><TD align=right>-139.36</TD></TR><TR align=left><TD align=right colSpan=2>Maximum</TD><TD>consecutive wins (profit in money)</TD><TD align=right>12 (1694.08)</TD><TD>consecutive losses (loss in money)</TD><TD align=right>5 (-698.82)</TD></TR><TR align=left><TD align=right colSpan=2>Maximal</TD><TD>consecutive profit (count of wins)</TD><TD align=right>1694.08 (12)</TD><TD>consecutive loss (count of losses)</TD><TD align=right>-698.82 (5)</TD></TR><TR align=left><TD align=right colSpan=2>Average</TD><TD>consecutive wins</TD><TD align=right>3</TD><TD>consecutive losses</TD><TD align=right>2</TD></TR></TBODY></TABLE>
http://www.fxnewstrader.com/fximages...p_boxer_b1.gif

Hi aparsai,

Interesting...tell us more.

What is the basis of the system?

Jacko

I will, as soon as I find that it is really a good system. Just as a quick note, it's based on BOX Trading. However, it uses CCI to define the direction of the trade and a rather complex approach to set the TP, SL, and TS levels,

Hello aparsai

I think that is interesting...that is, it has potential.

My only concern is that your average win is $95.91 versus an average loss of $139.36. (Perhaps your stops are larger than necessary??.. But if you reduce your stops, then your win/loss ratio deteriorates ??)

Most people, when they backtest a system, unconsciously and subconsciously tend to inadvertently "optimise" the system to find the "best fit".

I am just curious to see if that situation occurred in your system.

You asked the question "Is this a successful system?"
If you truly want a well considered answer, then please feel outline your systems parameters so that it can be discussed intelligently. The amount of trading "brainpower" on this Forum is incredibly high. (However there are some real turkeys here too... LOL).
If you seriously want a comprehensive analysis of your system, you should attempt to harness this FREE resource.

Jacko

Hi Aparsai,

The report looks pretty nice to me, especially the equity/profit curve. But I have seen systems with nicer reports and can't be profitable for different reasons. Your question is a little difficult to answer without knowing the actually system, the EA and your backtesting methods.

You can always start your forward testing to find out the truth.

aha

might you run the test again with these values (they are kelly formulas modified by risk of ruin that match the systems winrate,payrate)


<TABLE style="WIDTH: 38pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=50 border=0><COLGROUP><COL style="WIDTH: 38pt; mso-width-source: userset; mso-width-alt: 1828" width=50><TBODY><TR style="HEIGHT: 15pt" height=20><TD class=xl67 style="WIDTH: 38pt; HEIGHT: 15pt" align=right width=50 height=20>15.20%</TD></TR><TR style="HEIGHT: 15pt" height=20><TD class=xl67 style="HEIGHT: 15pt" align=right height=20>7.60%</TD></TR><TR style="HEIGHT: 15pt" height=20><TD class=xl67 style="HEIGHT: 15pt" align=right height=20>5.07%</TD></TR><TR style="HEIGHT: 15pt" height=20><TD class=xl67 style="HEIGHT: 15pt" align=right height=20>3.80%</TD></TR><TR style="HEIGHT: 15pt" height=20><TD class=xl67 style="HEIGHT: 15pt" align=right height=20>3.04%</TD></TR></TBODY></TABLE>


from the times and the equity curve this looks like it does better in trends, but it holds its own during the range as well

Jacko,

Thanks very much for your response.

The nature of this system is that the average gain is less than average loss but since the the profit rate is over 65% it makes money in the end. I've spend several hours to optimize the parameters. If I try to increase the average gain value the success rate will drop and so the total net decreases. So the answer to your second question is "YES" I did my best to optimize the behaviour of this system.

I will publish the code very soon. I just want to make sure it works properly and debugged. Let's continue discussions based on the current reports and very soon we can discuss the application itself. I need your and other's feedback to get the best behaviour out of it.

Thanks again

I quite agree with you. Backtesting cannot guarantee that a system is successful. I started forward testing this system last week and it works well so far. However, the backtesting of the system shows that it might be in loss zone for several weeks so I'm not quite sure when it would be appropriate to attach this to my live account.

My perception of those numbers is that they are VARs. Anyway I expanded the time from of the backtesting. It now tests the system from June 16, 04 to Oct 3, 06. I couldn't go further back as I have no access to 1M chart data. Anyway the following table shows the profit system makes for different VARs. I posted the detailed reports to my website www.fxnewstrader.com. You can click the links to view them all. BTW, it seems that maximum profit lies somewhere between 15.20% to 20% VAR as 20% VAR shows less profit than 15.20%

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VAR<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o></o>

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Net Profit<o></o>

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Detailed Report<o></o>

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0.50%<o></o>

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$3,147.79<o></o>

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Click Here<o></o>

</TD></TR><TR style="mso-yfti-irow: 2"><TD style="BORDER-RIGHT: windowtext 1pt solid; PADDING-RIGHT: 5.4pt; BORDER-TOP: #d4d0c8; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; BORDER-LEFT: windowtext 1pt solid; WIDTH: 49.05pt; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; BACKGROUND-COLOR: transparent; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt" vAlign=top width=65>

1.00%<o></o>

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$8,633.57<o></o>

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Click Here<o></o>

</TD></TR><TR style="mso-yfti-irow: 3"><TD style="BORDER-RIGHT: windowtext 1pt solid; PADDING-RIGHT: 5.4pt; BORDER-TOP: #d4d0c8; PADDING-LEFT: 5.4pt; BACKGROUND: #ccffcc; PADDING-BOTTOM: 0in; BORDER-LEFT: windowtext 1pt solid; WIDTH: 49.05pt; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt" vAlign=top width=65>

3.04%<o></o>

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$45,792.26<o></o>

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Click Here<o></o>

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3.80%<o></o>

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$70,147.98<o></o>

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Click Here<o></o>

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5.07%<o></o>

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$129,119.12<o></o>

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Click Here<o></o>

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7.60%<o></o>

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$337,342.23<o></o>

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Click Here<o></o>

</TD></TR><TR style="mso-yfti-irow: 7"><TD style="BORDER-RIGHT: windowtext 1pt solid; PADDING-RIGHT: 5.4pt; BORDER-TOP: #d4d0c8; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; BORDER-LEFT: windowtext 1pt solid; WIDTH: 49.05pt; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; BACKGROUND-COLOR: transparent; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt" vAlign=top width=65>

10.00%<o></o>

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$628,131.20<o></o>

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Click Here<o></o>

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15.20%<o></o>

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$3,846,616.36<o></o>

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Click Here<o></o>

</TD></TR><TR style="mso-yfti-irow: 9; mso-yfti-lastrow: yes"><TD style="BORDER-RIGHT: windowtext 1pt solid; PADDING-RIGHT: 5.4pt; BORDER-TOP: #d4d0c8; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; BORDER-LEFT: windowtext 1pt solid; WIDTH: 49.05pt; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; BACKGROUND-COLOR: transparent; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt" vAlign=top width=65>

20.00%<o></o>

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$2,939,788.57<o></o>

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Click Here<o></o>

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The shaded rows are those numbers you suggested.

Thanks,
Al

Seems weird your 10% yeilds 60% drawdown, your 20% yeilds 90% drawdown, but your 15% only yields 15% drawdown. Seems incredible, no?

Hi aparsai

The issue here is that you have "optimised" the parameters for a set of data over a (previous) period of time.

It does NOT follow that the parameters for the previous period will be the best parameters for the future period. (They could, in fact, be dismal failures which could lead to loss of all trading funds)

One of the tricks of scammer signal providers is to optimise the results over a past period and sell it to unsuspecting newbies as being the best method for future trading.
It sounds logical in theory but it is a fallacy.

Your concern is noted and valid. Hopefully when the parameters are released we can get independent confirmation of the validity of the back-tests at normal parameters.

You are looking at the wrong figure. The Maximum Relative Drawdown for 15% is almost 85%.
The value is shown right next to the Maximal Drawdown. Click here again to see it for yourself.

I don't get it. If you can't optimize the parameters based on the previous data then how could you do that. I have no other means to optimize this system. BTW, I don't want to sell anything here whether it's logical or fallacy.

What do you exactly mean by "normal parameters". I'm really confused. Could you explain?

Thanks,

DOH! You're right, and if you can't optimize future trades based on past performance, why even bother to position size in the first place? There is a difference between optimizing based on past trades for the best "tradable" system and what you are referring to, what I call "curve fitting". You have to realize there is a distinction between the two.

Normal parameters was probably the wrong term to use. The point of the previous quote was to raise alarm to optimizing variables based on past performance.

There is absolutely nothing wrong with optimizing variables. Jacko was merely responding the old "past does not equal the future".

The point is, if we get another back-test over a different period of data using your 2-year optimized values, if the test is good we should so decent results without having to re-optimize over the entire period. If running the test over a longer period of time causes us to have to re-optimize in order to gain profitability, we will know that the viability of the system will be in jeopardy because we would have to constantly change the parameters depending on our time horizon from the past that extends into the future.

As we don't know exactly what the system is comprised of as of yet, it's difficult to say what optimization (if any) you have done. We don't know whether or not you cycled through a range of EMAs or Stochs or what...

Keep doing what you're doing to determine the viability of the system. I'm sure you are forward testing it to ensure the integrity as far as you can see in order to determine whether or not to present the system code. When the system code is released, I'm sure the members will pick it apart to get a better understanding of it.

Thanks for the hard work.

I'll do my best to release the code in a couple of days (hopefully this evening). I need to document it to make it a readable code. I also need to explain how it works to make it easy for you guys to review it and get back to me with your comments.

Could you explain what does "curve fitting" refer to? Is there any good resource that explain it?

Thanks,

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I personally never touch a system that did not have at least profit ratio of 2.1 because forward testing usually deteriorates the results some what. I read a really good book a few years ago which you might consider reading, Its "Trading Systems that Work by Thomas Stridman". <o></o>

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Trader77<o></o>

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