SORRY, I THINK I WAS SUPPOSED TO POST THIS HERE INSTEAD OF THE TRADING SYSTEM FORUM
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Hello Everyone,
I was wondering if anyone knows any good general guidelines for evaluating the effectiveness of a trading system.
For instance:
1) A good trading system should be able to yield consistent profits in real time, as well as back testing. How far back is a reasonable amount of time of back testing to conclude that the system is a good system? (1 year, 2 years, etc.)
2) A good trading system should be able to profit in a number of years, but it should also profit in large amount of trades. I mean, how many trades each month/year is a reasonable amount to know that the system is good? If you only make two trades a year, the system probably isn't as reliable as a system that trades 1000 trades a year. What's a good amount?
3) Since good systems yield consistent profits, what's a good drawdown to have? No more than 5 or 10 percent of total account balance?
4) I've read that when more and more people trade the same system, specifically the same automated system, the effectiveness of that system diminishes. This is due to the big traders anticipating the trades or trading against the system to make it less reliable. Some people on forexfactory disagrees with this; which makes me feel a lot better. However, lets just say that that reasoning is true for the moment. If this is the case, what's a good amount of people to trade a certain system? I mean, do these big timers look at the number of simultaneous trades that happen at the same time?......or do they look at the volume of money traded at a certain time?
(basically, is there a difference between 1000 people trading $1000 in an automated system or 2 people trading $500,000 in the same automated system....................since more trades are happening with the 1000 people, is there more of a chance that big timers will trade against them as opposed to the 2 people trading the same amount???????)
But yeah, if maybe someone could answer these questions, and maybe throw in some other good points when evaluating your trading system, that would be great!
THANKS
------------------------------------------------
Hello Everyone,
I was wondering if anyone knows any good general guidelines for evaluating the effectiveness of a trading system.
For instance:
1) A good trading system should be able to yield consistent profits in real time, as well as back testing. How far back is a reasonable amount of time of back testing to conclude that the system is a good system? (1 year, 2 years, etc.)
2) A good trading system should be able to profit in a number of years, but it should also profit in large amount of trades. I mean, how many trades each month/year is a reasonable amount to know that the system is good? If you only make two trades a year, the system probably isn't as reliable as a system that trades 1000 trades a year. What's a good amount?
3) Since good systems yield consistent profits, what's a good drawdown to have? No more than 5 or 10 percent of total account balance?
4) I've read that when more and more people trade the same system, specifically the same automated system, the effectiveness of that system diminishes. This is due to the big traders anticipating the trades or trading against the system to make it less reliable. Some people on forexfactory disagrees with this; which makes me feel a lot better. However, lets just say that that reasoning is true for the moment. If this is the case, what's a good amount of people to trade a certain system? I mean, do these big timers look at the number of simultaneous trades that happen at the same time?......or do they look at the volume of money traded at a certain time?
(basically, is there a difference between 1000 people trading $1000 in an automated system or 2 people trading $500,000 in the same automated system....................since more trades are happening with the 1000 people, is there more of a chance that big timers will trade against them as opposed to the 2 people trading the same amount???????)
But yeah, if maybe someone could answer these questions, and maybe throw in some other good points when evaluating your trading system, that would be great!
THANKS
