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Why Technical Analysis Wins

  • #21
  • Mar 31, 2017 3:55am Mar 31, 2017 3:55am
Quoting dkrock
{quote} Good question. I used historical data to test theories. If they looked appropriate, then I would use months and months and months of demo trading the live market across multiple currencies to fine tune it. My objective was consistency. It took a long time because I kept trying to improve the precision using the live market. I spent free time reviewing and creating better ideas, but always tested them live to be sure they were accurate. When I finally got to the point where the precision broke, I knew where to reverse it to. I found that...

From my perspective it is about using a lot of data, forward testing on demo or otherwise is not efficient, because by its nature it must run in real time.

I reason that using historical data is just as valid as using data going forward because both are unknown, providing care is taken not to fit the data to the curve, and the advantage is that using historical data provides the ability to test a lot of setups very quickly. My approach is to use one year of data to test a theory and adjust parameters, and then test the same algorithm on as much data as possible, in probability theory it is really necessary to test at least 10,000 events to determine whether a correlation is "reliable", it is also possible and desirable during this process to understand the maximum draw down from peak of a strategy. Having passed back testing then I would run a system forward with small money to check whether it performs as my back testing would suggest.

I've posted this before, but here is a test I have run for a Spot market system that will go into Forward test soon. I have tested the method all the way back to 2003 and the results look remarkably consistent, with the only minor losing years around the 2008 financial crisis.
Attached File(s)
File Type: pdf Zen Testing.pdf   62 KB | 241 downloads
I live entirely from the growth of my personal trading account
  • #22
  • Edited 4:16am Mar 31, 2017 4:02am | Edited 4:16am
Quoting guybaker
{quote} From my perspective it is about using a lot of data, forward testing on demo or otherwise is not efficient, because by its nature it must run in real time.
Everyone has their own criteria for confidence. I would caution you though, that no matter what you discover, putting your money on the line is an additional change. I grew up in the Midwest and was never subjected to much gambling, so after I found my strategy I still had to learn how to gamble. While you are doing all your backtesting and gathering confirmation and confidence, you might also spend some time learning gambling psychology and how your mind and body are going to react to risk. It will happen because it is just a natural bodily reaction, so you can save yourself a little time by studying it while you are waiting. Good Luck.

PS. When it comes to emotional trading issues, I tried several different things, some common, some not so common. For me, I found that simply acknowledging and accepting the various fears actually limited them significantly. Instead of fighting them, I accepted them as fake assumptions (like a nightmare that isn't real either) in preparation for an event that may or may not occur and thankfully my body and mind worked properly to recognize the possibilities, but that logically, they were only possibilities and not real. So, pull the trigger and see what happens, rather than presuming or guessing the outcome and avoiding taking action. I don't win every hand in poker, make every basket I shoot, nor win every trade. Big deal. If after a series of bad trades you realize you have a flaw, fix it. It is that simple
You cannot be extraordinary by being normal
  • #23
  • Mar 31, 2017 4:12am Mar 31, 2017 4:12am
Quoting dkrock
{quote} Everyone has their own criteria for confidence. I would caution you though, that no matter what you discover, putting your money on the line is an additional change. I grew up in the Midwest and was never subjected to much gambling, so after I found my strategy I still had to learn how to gamble. While you are doing all your backtesting and gathering confirmation and confidence, you might also spend some time learning gambling psychology and how your mind and body are going to react to risk. It will happen because it is just a natural bodily...

What you say about emotions is very true, I have been doing this for over ten years and for a while I was a semi processional Blackjack Card Counter. I have another system that runs on Binary Options which has been running live with significant real money since December 2015. As it says in my strap line, all of my income comes for trading my own money
I live entirely from the growth of my personal trading account
  • #24
  • Mar 31, 2017 4:30am Mar 31, 2017 4:30am
Quoting guybaker
{quote} What you say about emotions is very true, I have been doing this for over ten years and for a while I was a semi processional Blackjack Card Counter. I have another system that runs on Binary Options which has been running live with significant real money since December 2015. As it says in my strap line, all of my income comes for trading my own money
I see why you need large amounts of data now, especially if you enjoy counting cards. I know the big picture data but prefer to trade within it, so I use less data than probably 95% of FF members, lol. It does not take me much data to make decisions, but that is all done on purpose. If you read my thread, you know I was working on my strategy while driving trucks, so my business plan was to automate the design so I did not have to pull over and draw anything. This automation gives me a continuous view of the live market and is designed to easily show entries and exits without any further input from me. So, since I see it as it happens, I do not refer to historical data for anything. If it is not in my immediate view, it is not applicable. I also trade during certain hours. If it happens outside these hours, I could care less. There are obviously various ways to profit, but I think my way would drive you nuts as surely as your way would drive me nuts All good though. Good Luck
You cannot be extraordinary by being normal
  • #25
  • Mar 31, 2017 5:04am Mar 31, 2017 5:04am
Quoting dkrock
{quote} Good question. I used historical data to test theories. If they looked appropriate, then I would use months and months and months of demo trading the live market across multiple currencies to fine tune it. My objective was consistency. It took a long time because I kept trying to improve the precision using the live market. I spent free time reviewing and creating better ideas, but always tested them live to be sure they were accurate. When I finally got to the point where the precision broke, I knew where to reverse it to. I found that...
I'm doing exactly the same
"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
  • #26
  • Mar 31, 2017 5:17am Mar 31, 2017 5:17am
Quoting michisuperfr
{quote} I'm doing exactly the same

So are you profitable?
I live entirely from the growth of my personal trading account
  • #27
  • Mar 31, 2017 5:18am Mar 31, 2017 5:18am
Quoting guybaker
{quote} So are you profitable?
Yes!
"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
  • #28
  • Last Post: Apr 12, 2017 11:24am Apr 12, 2017 11:24am
No doubt, technical analysis is very important parameter here! But don’t rely on only technical analysis! For being a successful Forex trader you need to work with both kind of market analysis! Yes, technical analysis is important for marking important swing points of market, but news trading knowledge is very important for market flow rate! Pro traders use both even they add psychological analysis on their check list!
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