Trend following not working on my 7,000 backtests !

This is a discussion on Trend following not working on my 7,000 backtests ! within the Trading Systems forums, part of the Methods category; Originally Posted by Quantt Well, I do use a completely mechanical system for stocks (essentially I have a robot to ...

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Old Oct 30, 2017, 3:54pm   #16
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qwertyuiop1 started this thread
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Originally Posted by Quantt View Post
Well, I do use a completely mechanical system for stocks (essentially I have a robot to do the trading), which works pretty good for me and it is sort of a trend following system, but I do not use ATR or MAs, so my advice is test everything that comes to your mind and sooner than later you'll find your system...
May I ask (if not being too cheeky that is), given yours is a fully mechanical system, what are the rules you use?
And what is the expectancy in terms of R?
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Old Oct 30, 2017, 4:00pm   #17
 
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May I ask (if not being too cheeky that is), given yours is a fully mechanical system, what are the rules you use?
And what is the expectancy in terms of R?
Unfortunately I have worked very hard on my system and I am not about to publish my rules unless I am payed 8 figures :-) But I can tell you, I found it by back testing any system I can think of or find for free (or small amount of money for books for example) and based on those failed back test and observations I came up with mine... Basically you are at the begging of your journey, you did test one, it didn't work, so you just have to go and do it again for another...
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Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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Old Oct 30, 2017, 4:06pm   #18
 
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Originally Posted by Quantt View Post
Unfortunately I have worked very hard on my system and I am not about to publish my rules unless I am payed 8 figures :-) But I can tell you, I found it by back testing any system I can think of or find for free (or small amount of money for books for example) and based on those failed back test and observations I came up with mine... Basically you are at the begging of your journey, you did test one, it didn't work, so you just have to go and do it again for another...
In all your backtesting would you share ANY other system (that you don't use, and won't ever use) that you found to have even a modest positive expectancy?

Please
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Old Oct 30, 2017, 4:10pm   #19
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I have lost all confidence on trend following.
You are doing it wrong. Back testing is 100% guaranteed to make demo pips. Just try some different parameters until you get the magic numbers.

But personally, I don't see much point. Demo pips can't be used for buying lunch. With all that back testing, you will surely get hungry and need lunch. If lunch doesn't pay for itself, then what's the point of all that effort ?

Magic numbers don't work in the real market. Although I am willing to change my mind on evidence.
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Old Oct 30, 2017, 4:37pm   #20
 
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In all your backtesting would you share ANY other system (that you don't use, and won't ever use) that you found to have even a modest positive expectancy?

Please
Frankly I plan to use most of my systems in one way or another and I am always looking for more...

The main reason is they are either too close to one another or completely different (which is an edge on itself to have uncorrelated market strategies)

Also no offense guys and galls, but we are competing with one another on a daily basis, so I cannot tell you even the systems that do not work, just because this will save you the time and effort and by the process of elimination you might discover some of my systems (great minds think alike) and the increase money flow will disrupt my earnings...

Sorry about that... if you want to discus wild carp river fishing tactics, I have nothing to hide there since we are all competing on a different venues, so I can open another topic about it...
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Count de Money number 1 trading rule: EDUCATE YOURSELF!

Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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Old Oct 30, 2017, 4:41pm   #21
 
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That's ok Q, I had to TRY you know
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Old Oct 30, 2017, 4:49pm   #22
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That's ok Q, I had to TRY you know
Why not buy market data from someone and resell on ebay for $9.98, cheaper than the other guy ? There must be money in it. With all the free marketing you get on the internet that systems work, you can't lose.

It's not a degree you need pip. It's the ability to see where value can be extracted.
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Old Oct 30, 2017, 5:13pm   #23
 
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Why not buy market data from someone and resell on ebay for $9.98, cheaper than the other guy ? There must be money in it. With all the free marketing you get on the internet that systems work, you can't lose.

It's not a degree you need pip. It's the ability to see where value can be extracted.

Find value and exploit it. That's beautiful, poignant this is what Bezos did in mid 90's selling books online. A great article on him read over weekend, can't find it to share here but I think that's why your sentiment just resonated with me.
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Old Oct 30, 2017, 5:29pm   #24
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Find value and exploit it. That's beautiful, poignant this is what Bezos did in mid 90's selling books online. A great article on him read over weekend, can't find it to share here but I think that's why your sentiment just resonated with me.
Well, the real reason he succeeded was because he was a superb merchant. Ebay preceded amazon but failed to achieve a success anywhere on the same scale. People who started ebay were idiot merchants and remained little people.

Unfortunately to extract money from markets, you have to be a good merchant. It helps to be born as one. Your pizza shop friend is one for instance. I am unconvinced they can teach you to be more than a mediocre merchant in a course if the needed genes are not present.
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Old Oct 30, 2017, 5:33pm   #25
 
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Well, the real reason he succeeded was because he was a superb merchant. Ebay preceded amazon but failed to achieve a success anywhere on the same scale. People who started ebay were idiot merchants and remained little people.

Unfortunately to extract money from markets, you have to be a good merchant. It helps to be born as one. Your pizza shop friend is one for instance. I am unconvinced they can teach you to be more than a mediocre merchant in a course if the needed genes are not present.

I kind of agree with this..everyone has heard this question:

Are great traders born, or made? The great ones are born, then made better. imo

if you don't have the "risk genes" you at at a disadvantage right from the start.
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Old Oct 30, 2017, 6:05pm   #26
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I have lost all confidence on trend following.

I back-tested the below system over 9 major FX pairs using 4 hour charts over 13 years which consisted of exactly 7,004 trades.

Plot 3 EMAS on chart: 5,21,55
Use a Stop loss od 2ATR(14)

Enter long/short when 5 EMA crosses above/below the 55 EMA
Exit when 5EMA crosses back over ANY of the 21 or 55 EMA (whichever comes first)

And that's it !

As you can see it adheres to all the fundamental rules of a good trading system:
- IT knows what instruments it trades
- Knows entry signal
- Knows exit signal before entering which facilitates both cutting losses and maximising profits
- cuts losses
- lets profits run
- knows risk in advance

It barely broke even before costs (It had an expectancy of 0.01R per trade). Since costs were about 0.02 R it had an expectancy of -0.01R per trade.

I then tweaked it slightly whereby I closed any trades that were not in profit after 24 hours. And for those that were in profit I moved the SL to breakeven.
Again- the overall results were very similar.

I'm not saying trend-following cant assist in trading. But based on my back tests - (which was a significant sample size in anyone's language) it definitely isn't a simple case of cut your losses and let your profits run and you are guaranteed profits in the long run like many sites lead you to believe.

It really needs to be fine tuned a bit better than that. I really don't know where to go from here to be honest.

Ya - you can tweak the parameters - but that should now make any difference in the long run.

Id be curious to get other peoples thoughts on it.
Take a look at your exits. My guess that you will find clusters of losing trades entered during weak trends that went profitable but gave the gains back as the ema crosses the 55 ema. Even if I am wrong about that the answer will probably be found failure patterns within the results.
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Old Oct 30, 2017, 10:04pm   #27
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I have lost all confidence on trend following.

I back-tested the below system over 9 major FX pairs using 4 hour charts over 13 years which consisted of exactly 7,004 trades.
You are testing a ma cross over system. Whether it is reflective of a trend following system is clearly debatable. You are equivocating the two and concluding that trend following is not profitable. You are using 2ATR as a form of stop loss/take profit but then again has the trend changed if that parameter is hit? In other words, you are taking a bunch of stuff and assume they are representative of trend behaviour and then make conclusions. IMO your starting point is flawed. You have an uptrend trend when you have higher highs and higher lows and that trend ends when two swing points are taken out. A trend doesn't begin when you have a ma cross over or ends when your 2ATR is hit.
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Thanks! The following members like this post: Kaeso , wallstreetwarrior87
Old Oct 30, 2017, 10:23pm   #28
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http://www.trade2win.com/boards/gene...ends-only.html
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Old Oct 30, 2017, 11:47pm   #29
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Originally Posted by Brumby View Post
IMO your starting point is flawed.
Simple as that! In one sentence.

Take it further - one word -


CONTEXT


How can a cross over at resistance be compared to a cross over at ATHs etc. Thats why these strats BE at BEST. Has to be some logic applied, as to what we are testing.

We can all drive a car at 70mph, better being on a motorway than a cul-de-sac mind you
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Old Nov 1, 2017, 12:24am   #30
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I trend-follow in forex, also indices and occasionally stocks and commodities.

I do take 20/50EMA cross-overs if price is on the right side of the 200EMA but these are speculative. My real trend-following trades come when the 20 is steadily and consistently on the leading side of the 50, and to be honest any entry signal that doesn't involve chasing price at an all-time high will do. Entry signals are unimportant TA, its finding the best the trend using TA that is important. I use less of an entry signal and more of an entry justification.

I also look at the length and consistency of trends to judge which ones would be best to enter. Once I've entered, if the trend continues, I look to pyramid repeatedly to build a bank of parallel trades of equal size. When I find an earlier post again I will re-post up more details here.

Keep at it though.
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