Automation And Simulation

This is a discussion on Automation And Simulation within the Trading Software forums, part of the Commercial category; Hi, I have been developing and trying to backtest strategies for FX trading using TradeStation 8 - which I believed ...

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Old Oct 1, 2004, 4:08pm   #1
Joined Oct 2003
Automation And Simulation

Hi,

I have been developing and trying to backtest strategies for FX trading using TradeStation 8 - which I believed was the best tool for this purpose. Now I finf that the Performance Reports are completely misleading when compared with 'actual trading tick by tick for instance, one system showed $179,000 profit YTD on a 45 minute chart but as soon as Intraday Bars were enabled at 1 minute intervals, it showed a $29,000 LOSS! - Not only this but because of the way TradeStation deals with Stops, it is impossible (as far as I know) to place a stops at the time of entry.

I'm so frustrated to discover after taking the time to 'get into' tradeStation that its own internal rules and assumptions mean that real trading results are hugely different to actual trading results and from what I can see on TS forums, the TS engineers don''t see this as an issue or seem willing to change anything soon. I believe in taking "calculated risks, but if the "Calculation" is inaccurate, then the assessment of risk will be too.

So the question is please, what do you use for backtesting and/or automation and does it work?


regards
Paul

PS If you are looking at Mechanical systems - watch out for "simulated Results" especially if the offered Performance report is a TradeStatione one, (which many are! - Thank goodness I discovered this issue before trading real money with it.
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Old Oct 1, 2004, 4:11pm   #2
 
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hi,
try www.fxengines.com. They have just started recently and you can have a 14 day free trial with them.

Eoin
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Old Oct 1, 2004, 6:26pm   #3
 
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TraderKing

This is a nice can of worms ! As an outsider, how can you know the assumptions that are made by these backtesting programs, applicable in particular to bar data ? I appreciate the fact that you have already spent time to learn the TS language, and I can understand your frustration. Howver, my strong advice, presuming that you have a leaning towards programming, is to create your own backtesting program from scratch, which doesn't have to be as difficult or time consuming as you may imagine. Then you can set up your own assumptions and you know exactly what you are getting, which in turn leads to increased confidence in the results. Logically if you don't have confidence in the results how can you trade the system ? I use VB for this purpose (IMO quite easy to learn), and it has served me admirably. YOu will of course need data, and on this subject, for the record, I have found trade data for some futures (particularly those less heavily traded) entirely unreliable for backtesting, and IMO ideally you need bid prices, not that you see these offered for sale though. I can back this statement up by comparing theoretical bid prices versus theoretical trade prices versus actual live trade results obtained. The correlation using bids is far better, although you still need to make an assumption about the BA spread.

Good luck !
rog1111


Quote:
Originally Posted by TraderKing
Hi,

I have been developing and trying to backtest strategies for FX trading using TradeStation 8 - which I believed was the best tool for this purpose. Now I finf that the Performance Reports are completely misleading when compared with 'actual trading tick by tick for instance, one system showed $179,000 profit YTD on a 45 minute chart but as soon as Intraday Bars were enabled at 1 minute intervals, it showed a $29,000 LOSS! - Not only this but because of the way TradeStation deals with Stops, it is impossible (as far as I know) to place a stops at the time of entry.

I'm so frustrated to discover after taking the time to 'get into' tradeStation that its own internal rules and assumptions mean that real trading results are hugely different to actual trading results and from what I can see on TS forums, the TS engineers don''t see this as an issue or seem willing to change anything soon. I believe in taking "calculated risks, but if the "Calculation" is inaccurate, then the assessment of risk will be too.

So the question is please, what do you use for backtesting and/or automation and does it work?


regards
Paul

PS If you are looking at Mechanical systems - watch out for "simulated Results" especially if the offered Performance report is a TradeStatione one, (which many are! - Thank goodness I discovered this issue before trading real money with it.
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Old Oct 2, 2004, 11:17am   #4
Joined Oct 2003
TraderKing started this thread Dear rog1111,

Thanks for the response,

Unfortunately I don't have a programming background but I was prepared to learn easylanguage, programming my own backtesting system isn't a realistic option for me. Some of the assumptions and rules are there in the TS manuals (although their implications only hit home when the results don't seem to make sense, and you start digging deeper, also examination of TS World forum threads and discussions and responses of TS moderators point one in the direction of these conclusions.

I agree that the area is a can of worms though - to mitigate the effects I asked one 'large brokerage' if they could provide an independent (account level) stop facility. The answer was no, although clearly if they can manage 'margin' on an account, it would seem feasable to put an absolute dollar stop on trades on an account. - this would at least provide some risk management for trading a system inititally until one could calculate the real performance.

The other approach was to approach the problem by getting API programmers to provide the ability to set stops at the API level, again independent of the underlying strategy trading system. almost any system is capable of generating Outlier losers from time to time (I don't mind the +ve outliers :-) ) but one -ve oulier trade where stops did not work for some reason) would potentially destroy the account..

Personally I don't believe anyone in their right mind (unless they have a huge account, would let lose an automatic system without some money management stops they can trust (which work even if the system or the connection goes down)

best regards
Paul
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Old Oct 2, 2004, 11:20am   #5
Joined Oct 2003
TraderKing started this thread
Quote:
Originally Posted by m_eoin
hi,
try www.fxengines.com. They have just started recently and you can have a 14 day free trial with them.
Eoin
Dear Eoin
Thanks for the tip.
Paul
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Old Oct 2, 2004, 11:34am   #6
 
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Have you tried Interactive Brokers ? If you are worried about stops, you could either use stop limit orders, with a wide limit to ensure execution (native to Globex), or if you wanted to be less "visible" then use their simple stop orders, which although simulated, are resident on the IB servers, and barring a server disaster, should get executed. Any of these standard options (and a whole lot more) could be programmed into the automation

rog1111
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Old Oct 2, 2004, 12:01pm   #7
Joined Oct 2003
TraderKing started this thread Hi rog1111,

I looked at IB but they don't do Forex , there is also a number of possible patforms / APIs / broker combinations I have found out about but so far I haven't found a combination which provides a system independent 'fail-safe' stop either at the Account level (broker Side or the API (inteface) level and also I am still searching for method of 'testing' strategies which produce 'realistic' results.

I have a systems house / broker who writes their own mech systems who (out of interest in one of my systems) are currently trading it live on a demo account (but its on their server) - so maybe just walking it forwards in real-time like this is the answer?

There are some promising developments, someone has drawn my attention to www.tradeoptimizer.com which if nothing else is a lot less expensive than TS8 :-) but I don't know it its any better in terms of backtesting results.

All I can say is that its a reall roller-coaster, I have had real highs when I believed I had a winning system and then real lows when I found the results didn't follow in real-time or that it couldn't be traded with reliable stops.

best regards
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Old Oct 2, 2004, 12:29pm   #8
Joined Mar 2004
tradestation doesnt (at the moment) permit automated execution on FX markets, though this may change after the october conference (maybe some big things in the pipeline?).

It should, with reference to your first post, be possible to bundle your entry with your stop and even a target all in the same EL statement, for example:

if condition1 and condition2 then begin;
buy next bar at market;
sell next bar at entryprice -stopvalue stop;
sell next bar at entryprice +targetvalue limit;
end;

if you have your exits/stops packaged into an EL statement that begins with something like "if marketposition =1 then..." then of course you cant use this statement to initiate a stop on the same bar as entry because EL commands are only run at the end of each bar so TS EL wont recognise marketposition =1 until the close of your entry bar.

I am not fluent in EL however, though during my own efforts to code up some ideas into TS I did encounter the same problem with stops on entry. The best place to ask such questions is in the EL forum, there are answers to most such questions available.

Curve fitting and overoptimisation are the biggest enemies of any promising automated trading system. Testing on out of sample data is a must as are walk forward testing on live data to get an idea of real performance vs past tests. This way you can establish whether your backtesting was too closely fit to past circumstances that will not repeat.

Also understanding how TradeStation EL or indeed any programming language works and handles the available data is essential to your success. TS can be used to create highly successful systems however as many users on the TradeStationWorld forum have attested to.
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