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actual backtesting

  • #1
  • First Post: Nov 20, 2008 9:52pm Nov 20, 2008 9:52pm
anyone here actually backtest their strategies extensively. (none of this post 2 screenshots of a percect senarion bs)

I just finished testing a new system ive been working on for a few months and heres the equity curve after 200 trades. anyone else care to share actual backtesting results?

http://i62.photobucket.com/albums/h8.../2008sofar.jpg

numbers on the y axis represent % of starting capital.
  • #2
  • Nov 24, 2008 5:31pm Nov 24, 2008 5:31pm
this is STRATEGY 1 after 200 trades:
http://i203.photobucket.com/albums/a...k/blazeeur.jpg
the left is the % equity curve, like yours. the trades are based on 1% account equity. this was on EURUSD



here is STRATEGY 2 after 200 trades:
http://i203.photobucket.com/albums/a...k/trendeur.jpg
since it's less consistent, i lowered the risk to 0.5%. this was on EURUSD.




and here is STRATEGY 3 after three months of trading (2113 trades):
http://i203.photobucket.com/albums/a...wok/prdjpy.jpg
i used three months because it trades so frequently. also, i risked 0.2% per trade because of the number of trades. this was on USDJPY.


see? you aren't alone.
  • #3
  • Nov 24, 2008 5:35pm Nov 24, 2008 5:35pm
Quoting blacksun1
and here is STRATEGY 3 after three months of trading (2113 trades):
That's A LOT of trades!
  • #4
  • Nov 24, 2008 6:30pm Nov 24, 2008 6:30pm
Back-testing = path to poor house

Sorry, hate to be blunt - time in front of the screens and experience is only way I know to figure out what works vs what does not.
  • #5
  • Nov 24, 2008 7:32pm Nov 24, 2008 7:32pm
I hope you are not fools.

Backtesting is simply a Filter to eliminate those 'Late Friday Night' revelations you had on "I NOW Know How to Crack the Market."

Forward Test the line chart before putting your icles on it.

Yeah Yeah; I know that takes time & may mean you might have to wait until you are 30 years old before you retire a Mill.. But it may also stop you from being at the Tail End of a very long "I NEED a BAILOUT" lineup.

FX {trading in general} is a Turtle's Business OR A Hare's Video Arcade...

Successfull Sclapers play The Turtles Game in the Arcade. {Which is what makes them a Special Breed}.
  • #6
  • Nov 24, 2008 7:57pm Nov 24, 2008 7:57pm
As long as back testing is not back fitting, I think it is a useful step in strategy development. How would one know if a strategy had half a chance at success without testing on historic data, then forward testing on new incoming ticks?
  • #7
  • Nov 24, 2008 8:23pm Nov 24, 2008 8:23pm
Quoting Dave Floyd
Back-testing = path to poor house

Sorry, hate to be blunt - time in front of the screens and experience is only way I know to figure out what works vs what does not.

these work in real time. i proved them live before i started backtesting just so you know.
  • #8
  • Nov 24, 2008 8:24pm Nov 24, 2008 8:24pm
Quoting LongToBeFree
That's A LOT of trades!

haha no kidding. between 15 - 25 a day. and its a swing system lol. i usually have like 30 - 40 in at a time.
  • #9
  • Nov 24, 2008 8:25pm Nov 24, 2008 8:25pm
Quoting fxid10t
As long as back testing is not back fitting, I think it is a useful step in strategy development. How would one know if a strategy had half a chance at success without testing on historic data, then forward testing on new incoming ticks?
Touche.
  • #10
  • Nov 24, 2008 9:24pm Nov 24, 2008 9:24pm
Quoting fxid10t
As long as back testing is not back fitting, I think it is a useful step in strategy development. How would one know if a strategy had half a chance at success without testing on historic data, then forward testing on new incoming ticks?
The answer is simple - the markets never trade the same way for long periods of time - a data series that worked once, may not work again.

People (especially newer traders) severely underestimate how important experience and feel are to success - it is not as simple as making a trade each and every time a signal shows up that appears to have worked from a back-testing standpoint. Only a trader who has lived through various markets can distinguish between a valid set-up and one that is likely not to work, even though they may look identical. The last 2 months represent a perfect situation where a system traders would have got crushed - you had to exercise so much discretion in the last 2 months - if not, you are likely broke or severely wounded.

Last time I talked to trader friends of mine at the big banks and some hedge funds, none of them were running TradeStation doing back-testing - it sounds appealing, but forget about it unless you have some advanced math or physics degree - those are the only people who have a chance.

Winton Capital out of London is only one of a few firms that actually can run consistently a black box model. So unless you can compete with their firepower; do it the old fashioned way - sit down in front of your screens and figure it out.
  • #11
  • Edited 1:35am Nov 25, 2008 1:22am | Edited 1:35am
Quoting Dave Floyd
The answer is simple - the markets never trade the same way for long periods of time - a data series that worked once, may not work again.

People (especially newer traders) severely underestimate how important experience and feel are to success - it is not as simple as making a trade each and every time a signal shows up that appears to have worked from a back-testing standpoint. Only a trader who has lived through various markets can distinguish between a valid set-up and one that is likely not to work, even though they may look identical. The...

Hi,

I have never heard so much BS in my entire career - and that amounts to almost 22 years in the market.

First of all, non-discretionary methods or systems eliminate precisely the need to distinguish between as you put it valid set-ups and set-ups that are likely not to work. I trade a method that allows for no discretion whatsoever and September as well as October were extremely profitable. Also, a non-discretionary method does not have to be a black-box - so please do not confuse younger traders here with technical terms you haven't explained properly.

Now to back-testing: if one does a series of live trades over a period of lets say 2 years, and those 2 years are in the past, what does that costitute? The market itself does not know whether you trade a method with real money behind it or not, so ultimately every sequence traded (live or demo) will be in the past once executed. The results become part of data to be put into a specific context: the context of a method - whether you call it back-test or past live test or live results depends on your bank account - nothing else.

I would also argue that if you do your own research into actual market mechanics, and not pick up any rubbish methods promoted on a forum or sold by some scammer on the web, you will inevitably have to conduct some serious testing - which ever way you look at it: you need proof of your own theories in order to produce a lasting edge. Scientist learn that in the first year at university. And no, you do need need a degree in advanced math ot physics to have chance.....man where do you get all this from?

And yes, blablabla I know as well people in the industry....some of them are exclusively trading algorithmic programs and produce decent returns - whatever the markets. If they are geared for high volatility, markets of the past 3 month are right up their street.

Retail traders do not have to compete with the firepower of funds anymore since people can trade ultra small increments nowadays - its not the road to riches but you can test strategies without going bust straight away.

Keep researching Dave Floyd.

regards
daytrading

P.S. my take on your claim regarding the importance of experience and feel is this: the only thing experience tells me is that feelings are misplaced in trading.
Enter Signature
  • #12
  • Nov 25, 2008 8:48am Nov 25, 2008 8:48am
Quoting daytrading
Hi,

I have never heard so much BS in my entire career - and that amounts to almost 22 years in the market.

First of all, non-discretionary methods or systems eliminate precisely the need to distinguish between as you put it valid set-ups and set-ups that are likely not to work. I trade a method that allows for no discretion whatsoever and September as well as October were extremely profitable. Also, a non-discretionary method does not have to be a black-box - so please do not confuse younger traders here with technical terms you haven't explained...
wow - someone is a bit grumpy - you missed my whole point - I must have hit a nerve. The premise of the original posting was a graph that showed back-testing results. The same types of graphs you see in all the ads on the net for how to make trillions of $$ trading FX (although I know the thread starter was not intending that).

My point is that back-testing alone is misleading and suggests that all you need to do is some simply curve fitting and voila riches will follow.

Even if I were to 100% buy the argument for back-testing, it will take many hours, months perhaps even years to come up with something that will work consistently - it will not be found on a forum or bought at the local Holiday Inn by some used car salesman.

And I will keep researching as you suggest in the last line of your posting because my hard work leads to this
  • #13
  • Nov 25, 2008 9:54am Nov 25, 2008 9:54am
Quoting Dave Floyd
wow - someone is a bit grumpy - you missed my whole point - I must have hit a nerve. The premise of the original posting was a graph that showed back-testing results. The same types of graphs you see in all the ads on the net for how to make trillions of $$ trading FX (although I know the thread starter was not intending that).

My point is that back-testing alone is misleading and suggests that all you need to do is some simply curve fitting and voila riches will follow.

Even if I were to 100% buy the argument for back-testing, it will take...

Hi,

Your message is not very clear - even when I read between the lines. How can it be clear for beginners? Anyway, I can only say that when dispensing voluntary advice, it should be very concise - the fact that you give it for free does not exclude you from that obligation.

More to the point: back-testing does not automatically imply curve fitting. Curve fitting is also largely related to the use (or misuse) of indicators.

Anyway, I made my point.

Who is John Galt?

regards
daytrading

P.S. my sharpe ratio beats yours, haha
Enter Signature
  • #14
  • Last Post: Nov 25, 2008 11:24am Nov 25, 2008 11:24am
You guys should keep on arguing past each other, it's riveting stuff.
The breaking of a wave cannot explain the whole sea.
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