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How long should I test this system?

  • #1
  • First Post: Jul 8, 2011 11:08am Jul 8, 2011 11:08am
i use a daily system. How long do you think i shall test it. One year?
  • #2
  • Jul 8, 2011 11:10am Jul 8, 2011 11:10am
The more the better but the market keeps changing with time.
  • #3
  • Jul 9, 2011 12:50am Jul 9, 2011 12:50am
tell us more about your system then maybe we can give you a better answer.
  • #4
  • Jul 10, 2011 11:42am Jul 10, 2011 11:42am
Hi all, Ive only begun trading recently and would just like some advice on which technical indicators offer the best buy and sell signals. I have a full understanding on what technical indicators identify but I'm still unsure on which ones to use. If anybody could reply with a useful strategy or some advice on the use of indicators it would be greatly appreciated!
  • #5
  • Jul 12, 2011 1:27am Jul 12, 2011 1:27am
One year is absolutely not enough to test a daily mechanical system.

I trade a mechanical system, so I understand. Especially given the nature of the economy (crisis) the past few years, made for some strange conditions.

Test 3-5 years I recommend (others will recommend longer, but I think that anything longer than 5 years ago is irrelevant), and weight 2010 as most important, 2009 second importance, etc.
  • #6
  • Jul 12, 2011 1:45am Jul 12, 2011 1:45am
Quoting RodMca
Hi all, Ive only begun trading recently and would just like some advice on which technical indicators offer the best buy and sell signals. I have a full understanding on what technical indicators identify but I'm still unsure on which ones to use. If anybody could reply with a useful strategy or some advice on the use of indicators it would be greatly appreciated!
This forum is filled with people looking for indicators. Most of these people fail / will fail at trading. If you are asking for "the best buy and sell signals," I know where you are in your development as a trader. The truth is that you must learn to trade without indicators, and then you will be able to use them as a tool, but chances are you will ignore this just like everyone else, and blow an account or 5 taking signals and not knowing a single reason why you actually entered the market. But I will answer your question since u asked..

Just load up three different timeframes, the larger the better. Daily, 4H, and 30M is probably good. Put a 50 moving average on each chart. Your goal is this: Stay out of ranging markets. Get in during a trend and ride the wave. Cut your losses quickly, and let your profits run. This is crucial. Price usually will be below the moving average in a downtrend, and above the moving average in an uptrend. Only sell when it is below the moving average on the D, and 4H charts, once it crosses the 30M downward. Only Buy when it is above on the daily 4H and then crosses on the 30M. This is essentially the most basic system for getting in on pullbacks during a trend.

But you still have to think about everything. Timing is everything. There are many things you will have to figure out for yourself, but if you want my advice, clear your chart and save yourself a few years of your life.
  • #7
  • Jul 12, 2011 10:45pm Jul 12, 2011 10:45pm
How many trades does your system generate a year? You need sufficient sample size to come to a sound evaluation. I would really recommend to get your hands on as much data as possible. It is not difficult to get daily EOD data dating back to 1991. Also you will not have enough data to perform optimization, out of sample testing.

Trading systems try to capture a repetitive profitable behaviour. There will definitely be times when the system will not do well as the behaviour is not there. Testing on as long a period as possible lets you know when your system WILL NOT WORK because invariably it will encounter all sorts of different market conditions. Also there might be a parameter drift for example in the early 90's, trends may be less choppy and trailing stops could be tighter, however in recent years a tight trailing stop may not do well.

At the end of the day, you will want to ask yourself whether you are trying to create something that is robust and can weather through even suboptimal conditions or you want to "fit" it to very recent years and not want to consider that the market may very well revert to certain behaviours in the past
  • #8
  • Jul 13, 2011 11:58am Jul 13, 2011 11:58am
Quoting RichFWebb
This forum is filled with people looking for indicators. Most of these people fail / will fail at trading. If you are asking for "the best buy and sell signals," I know where you are in your development as a trader. The truth is that you must learn to trade without indicators, and then you will be able to use them as a tool, but chances are you will ignore this just like everyone else, and blow an account or 5 taking signals and not knowing a single reason why you actually entered the market. But I will answer your question since u asked..

Just...
Thanks for the excellent advice i will begin trading using your method as i have had huge ups and downs with the trading methods i've used. Yours seems clear and concise much appreciated!
  • #9
  • Edited 12:28pm Jul 13, 2011 12:18pm | Edited 12:28pm
Quoting RichFWebb
This forum is filled with people looking for indicators. Most of these people fail / will fail at trading. If you are asking for "the best buy and sell signals," I know where you are in your development as a trader. The truth is that you must learn to trade without indicators, and then you will be able to use them as a tool, but chances are you will ignore this just like everyone else, and blow an account or 5 taking signals and not knowing a single reason why you actually entered the market. But I will answer your question since u asked..

Just...
Indicators DO work and can be quite accurate in generating trading signals and because they are mechanical they take the emotions and guesswork out of the equation once you have developed a system on how to use them.

BUT you DO have to know WHY and HOW they work instead of blindly following them. That's when you blow your account.

Looking at charts from different TF is useful in terms that it gives you a big picture of where things are but it really doesn't help much in generating trading signals in day-to-day trading. And not to mention that the different TF can be in conflict of each other.
Make your losses in demo. Earn your profits live.
  • #10
  • Jul 13, 2011 12:24pm Jul 13, 2011 12:24pm
Well i use RSI and MACD, MACD is generally accurate as is the RSI, my major downfall is when to enter and exit a trade. I often see green and just take my profits, I know its a discipline in itself to stop myself from doing this but its just fear that I have missed the most profitable point at which to take profits.
  • #11
  • Jul 13, 2011 1:06pm Jul 13, 2011 1:06pm
the truth is that all indicators = about 50% success rate if you take every signal. factor in the spread, and now you are losing consistently. The way to use an indicator successfully is to be able to discriminate which signals to take and which not to take. So the best way to think about an indicator might be that it indicates a trade is available to take, but not necessary to take one. It comes down to your decision making process, and you must cut losses quickly, and let your profits run.
  • #12
  • Edited 2:20pm Jul 13, 2011 1:29pm | Edited 2:20pm
Quoting RichFWebb
the truth is that all indicators = about 50% success rate if you take every signal. factor in the spread, and now you are losing consistently. The way to use an indicator successfully is to be able to discriminate which signals to take and which not to take. So the best way to think about an indicator might be that it indicates a trade is available to take, but not necessary to take one. It comes down to your decision making process, and you must cut losses quickly, and let your profits run.
That's why you develope a system that dictates HOW you use the indicators and test it thoroughly to make sure it generates consistent profit. The key to use indicators is:

It's not WHAT you use but HOW you use it (them)
Make your losses in demo. Earn your profits live.
  • #13
  • Jul 13, 2011 2:16pm Jul 13, 2011 2:16pm
i gotcha, i understand systems, that style of trading just doesn't agree with me, that's all. i was a true believer in systems, but once I figured out the psychology of the market's underlying decisions and learned to control my emotions and trigger finger, I have found it infinitely more rewarding than making money because this line crossed that line.

either way though,

$ is $.

so you've just gotta go with what works for you.
  • #14
  • Jul 13, 2011 6:10pm Jul 13, 2011 6:10pm
Thanks very much for the advice guys, think i might take a break and read a couple of more books and reduce the size of my trades significantly until i get a proper feel for the market and find my own methods of trading and stricter risk management perhaps. Once again thanks.
  • #15
  • Jul 13, 2011 9:41pm Jul 13, 2011 9:41pm
Quoting RodMca
Thanks very much for the advice guys, think i might take a break and read a couple of more books and reduce the size of my trades significantly until i get a proper feel for the market and find my own methods of trading and stricter risk management perhaps. Once again thanks.
Hope we helped. Anytime when you feel your system is not generating pips or not the amount of pips you want, feel free to go back to the drawing board to tweak the system and demo trade until it's profitable before you promote it into real trading.

Good luck!
Make your losses in demo. Earn your profits live.
  • #16
  • Jul 14, 2011 8:57am Jul 14, 2011 8:57am
Quoting RichFWebb
the truth is that all indicators = about 50% success rate if you take every signal. factor in the spread, and now you are losing consistently. The way to use an indicator successfully is to be able to discriminate which signals to take and which not to take. So the best way to think about an indicator might be that it indicates a trade is available to take, but not necessary to take one. It comes down to your decision making process, and you must cut losses quickly, and let your profits run.
Do these results look like 50%....... this is using a very simple mechanical trend trading system.
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  • #17
  • Jul 14, 2011 9:50am Jul 14, 2011 9:50am
i was just trying to say not to expect anything over break-even, from blindly following a tool, without MM and positioning, R:R, etc

a bad trader can still blow an account with a good system.. that was my point. it is indisputable.
  • #18
  • Jul 14, 2011 11:01am Jul 14, 2011 11:01am
Quoting tradestar1
Do these results look like 50%....... this is using a very simple mechanical trend trading system.
67% win rate is not typical of a trend following system. However you only have 32 sample sizes. If you can get at least a hundred trades while still maintaining a profit factor of >3, that would be something assuming its not overfitted
  • #19
  • Jul 15, 2011 4:44pm Jul 15, 2011 4:44pm
I'm workin on it.......
  • #20
  • Jul 27, 2011 4:13am Jul 27, 2011 4:13am
Great words of wisdom! I think I'm going to try and trade without indicators. I will let you know how it goes!
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