Testing entries: what percent profitable trades will do?
Yesterday was error-free. NinjaTrader behaved itself completely and acted like a General Release rather than a Beta version. It seems to go through these unstable phases. Being optimistic perhaps but it feels that the stable phases in-between are getting longer.
Right now I'm testing the entries on my version of the 3 Ducks which is still up on blocks in the garage unfortunately.
I am testing it on the extended set of forex pairs and I'm looking for an entry mechanism that works. But what is 'works'? My long term approach has always been 55% profitable trades is the threshold before I go on to test an exit mechanism on it.
The default exit mechanism I use for testing entries is equally distant fixed targets and stops.
Neither of these 2 factors - the % threshold or the default exit mechanism - has changed over the last 2 years reallly and I'm beginning to think I need to be a bit wiser about it.
55% is probably what I heard or read was a suitable level. I can't remember. That's 5.5 out of 10. The thing is, it's damn difficult to achieve.
Secondly the exit mechanism for it - fixed targets and stops - is fine, but how far from the entry should it go? I figure the stop should be one that I can realistically expect to use as the initial stop in the final system, so I've already made an assumption about the risk profile I want for this system.
I use fibonacci pivot points for part of the entry trigger, so I decided that the exit stop should be set at the PP itself, and I set the target the same distance above / below.
It's taken me 3 days to find something that produces >55% profitable entries but I'm finally there - or at least I hope I am, I developed this on a 2 year window and I'm now testing it over 10 years to see if it held up.
The entries are based on the 3 Ducks, but used differently from Captain Currency's textbook implementation. Instead of a simple
Code:
if (Close[0] > slowMA[0]
&& Close[0] > mediumMA[0]
&& Close[0] > fastMA[0])
which doesn't work in any combination I can see across all the currency pairs I use, I changed it to this:
Code:
if (ma3[0] - ma2[0] > ma3[60] - ma2[60]
&& ma2[0] - ma1[0] > ma2[240] - ma1[240]
&& fastStraightRuns[0] > straightRuns[0]
&& fastStraightRuns.LongAverage[0] > straightRuns.LongAverage[0]
&& Weighted[0] > pivot.R1[0])
where ma1 is the long 4hr duck, ma2 = 1hr duck and ma3 = 5mins.
StraightRuns is a simple indicator I wrote to give the average number of consecutive bars in the same direction - the default is either long or short, and StraightRuns.LongAverage is the number just for up bars.
.ShortAverage for consecutive down bars.
And pivot.R1 is the standard 3 Ducks daily pivots entry trigger.
So that hits 55% profitable trades - but appalling stats otherwise! Only $5 per trade.
How I would love to find something that isn't curve fit that gave 60% profitable trades.
Argh! The backtest on 10 years just finished and the results don't hold up. It only shows 52.5% profitable trades. I have to admit it did smell slightly of curve fitting with those 5 degrees of freedom going just on the entry filter.
