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 qwertyuiop1 Hmm.. again I genuinely do appreciate the suggestion. But trying to identify catalysts that aren't false ...

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Old Oct 30, 2017, 3:26pm   #9
FXX
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Originally Posted by qwertyuiop1 View Post
Hmm.. again I genuinely do appreciate the suggestion.

But trying to identify catalysts that aren't false catalysts for movements on major FX pairs is nigh on impossible for the lay man on the street.
And you'll still need a mechanism to cut losses. Which means your back to using indicators or price action.

I'm suddenly very sceptical on trend following as a concept. Im not going to be so arrogant and state that people aren't making money from trend following principles.

But if you read all the books the overwhelming message is that once you stick to the basic principles of trend-following (cut losses and let profits run), then its really just a psychological challenge after that.

That is seriously under question in my mind right now.

The fact is my system obeys all the principles. To turn it into a positive expectancy system we would be getting into the world of very specific tweaks a.k.a. curve fitting.
My understanding is that any successful trend following system should be robust. Making specific tweaks geos against this principle.
Its simple, create a script that identifies a 4 hour candle that is on or larger than the average daily range. I highly doubt you will find many instances of these that turned out to be false positives. The only other suggestion I have is to drop automated technical trading forex and start using fundamentals instead.
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Old Oct 30, 2017, 3:33pm   #10
 
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Originally Posted by qwertyuiop1 View Post
The 2 ATR stop loss was my own. But its as good as any. Its a popular stop loss placement used by many people. It gives the price plenty of room to move. And as I stated in another post, the overwhelming majority of trades were exited due to crossing of EMAS. So its not like the SL is way too close that it impacts the expectancy of the system.


The EMAs used were taken from some other guys course that I bought for £100. In saying that I could have used any EMAs. It really shouldn't matter over a sample size of 7,000 trades.

I haven't backtested as comprehensively any other system. But in saying that - no matter what variances you put on the system, all trend-following strategies are largely similar in the basic principles.

IS there anyone out there that uses a trend-following system successfully?
If so what is your expectancy per trade in terms of R? And over what ample size?
Frankly I don't find moving averages cross overs to be a good indicators for stocks (I have no FX experience), maybe only as long term trend indicators for indexes...
I do admire your back testing, this is the way, so just go ahead and test another system and so forth until you find what works for you...
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"If you don't find a way to make money while you sleep, you will work until you die." Warren Buffett, CEO of Berkshire Hathaway.

My 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, 3:35pm   #11
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Originally Posted by FXX View Post
Its simple, create a script that identifies a 4 hour candle that is on or larger than the average daily range. I highly doubt you will find many instances of these that turned out to be false positives. The only other suggestion I have is to drop automated technical trading forex and start using fundamentals instead.
You mean when the 4 hour candle is larger than the daily ATR use this as an entry?

This could certainly be used a ns tested as a possible entry signal. No doubt about that.
But it all swings in roundabouts. IN waiting for that you could miss out on the beginning of a move whereas my system may have gotten you in to it earlier.

And if you are of the belief (which most seem to be) that the entry really is the least significant part of a trade, and that its all in the trade management then it shouldn't really make much of a difference what you use as your entry.

IN saying that - i'm not saying you're wring. Maybe with proper testing it could be a very successful system and it could have a very large percentage of winners.

But for me I would intuitively go along with the belief that its all about trade management rather than trying to perfect entry signals.
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Old Oct 30, 2017, 3:40pm   #12
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Originally Posted by Quantt View Post
Frankly I don't find moving averages cross overs to be a good indicators for stocks (I have no FX experience), maybe only as long term trend indicators for indexes...
I do admire your back testing, this is the way, so just go ahead and test another system and so forth until you find what works for you...
Well...I suppose that is my concern. I really like the concept of mechanical trend following - and I just assumed once I adhered to the basic principles then it would naturally work....but alas that is not the case.

And at the end of the day, all trend following systems are broadly similar. There's only so many different way someone can cut losses and let profits run.
If you are using ATR or MAs or something else, over the long run its all much of a muchness.

Hence this thread. I am now questioning the entire concept of trend following.

Do my results mean I should abandon trend following completely? Id love if someone could persuade me not to - but my backtest results only point me in one direction./
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Old Oct 30, 2017, 3:42pm   #13
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Originally Posted by qwertyuiop1 View Post
You mean when the 4 hour candle is larger than the daily ATR use this as an entry?

This could certainly be used a ns tested as a possible entry signal. No doubt about that.
But it all swings in roundabouts. IN waiting for that you could miss out on the beginning of a move whereas my system may have gotten you in to it earlier.

And if you are of the belief (which most seem to be) that the entry really is the least significant part of a trade, and that its all in the trade management then it shouldn't really make much of a difference what you use as your entry.

IN saying that - i'm not saying you're wring. Maybe with proper testing it could be a very successful system and it could have a very large percentage of winners.

But for me I would intuitively go along with the belief that its all about trade management rather than trying to perfect entry signals.

if you want to get in sooner then you have to incorporate fundamentals. Here are some examples of the sort of bars i mean on EURUSD
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Old Oct 30, 2017, 3:50pm   #14
 
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Originally Posted by qwertyuiop1 View Post
Well...I suppose that is my concern. I really like the concept of mechanical trend following - and I just assumed once I adhered to the basic principles then it would naturally work....but alas that is not the case.

And at the end of the day, all trend following systems are broadly similar. There's only so many different way someone can cut losses and let profits run.
If you are using ATR or MAs or something else, over the long run its all much of a muchness.

Hence this thread. I am now questioning the entire concept of trend following.

Do my results mean I should abandon trend following completely? Id love if someone could persuade me not to - but my backtest results only point me in one direction./
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...
__________________
"If you don't find a way to make money while you sleep, you will work until you die." Warren Buffett, CEO of Berkshire Hathaway.

My 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, 3:52pm   #15
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if you want to get in sooner then you have to incorporate fundamentals. Here are some examples of the sort of bars i mean on EURUSD
Yes - I do see those bars. But like any system they only provide the entry.
You still need to know
- where to place stop -loss.
- how to cut losses short
- How to take profit.


Basically you need to come up with a full trading plan - put the whole lot together and then backtest,. And until you've done that we really cant say one way or the other whether its any better or worse than my system.

Essentially you've only given an alternate entry, And as stated previously, most experts will agree that this is in fact the least important part to any any system.

Nut in saying that - I'm not suggesting your system shouldn't be developed and backtested. It may well prove successful. But for now we cannot say.
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Old Oct 30, 2017, 3:54pm   #16
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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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