Forward Testing.

[kimo'sabby]

You can get "trends" in random or non-random data* because they are only identified after they have occurred. If you don't subscribe to the idea that "edges", as I define them, exist, then you can still trade a "trend". But your results are exclusively down to chance (not that there is anything explicitly wrong with that). You could equally trade a mean reverting strategy with the same consequences.

But if you think that there is an edge in trends (for example that they occur more often than you would expect from random data, or there are events that are a precursor to a trend developing), you might like to know how much your exploitation of it contributed to your P&L, and how much was down to luck.

* this is a bit ambiguous, but for the sake of argument we'll run with it.

Yeh. Everything amounts to equal, minus costs.

Diversity, multiple markets, kinda boils down to the same thing.

Outliers? Please, dont tell me i've been reading books about jammy barstewards?

 

[brewski1984]

I've spent the last few days trying to get my head around these posts, some of you guys on here are incredibly clever. I wonder just how many people on this forum have done any or all of the above testing, my guess is 95% of people didn't bother and just went straight to throwing their money down the crapper/vendoring.

 

[Steven2805]

I've spent the last few days trying to get my head around these posts, some of you guys on here are incredibly clever. I wonder just how many people on this forum have done any or all of the above testing, my guess is 95% of people didn't bother and just went straight to throwing their money down the crapper/vendoring.

That's the harsh reality of trading. I don't know any numbers ect but yes I would assume a "lot" of new traders take the plunge on day one, perhaps after reading a trading book (which don't get me wrong trading books aren't bad but don't base your entire theory on one persons view). People sometimes are told/find a strategy and assume it works, no testing not theory and expect it to work.

It worked for XYZ so it should work for me. No...If you can't see the strategy setting up then you have no chance of being able to trade it. Then if you have no practice on say even a demo account you might not place stops and wipe out your account in 1 day

 

[Hakuna Matata]

Yeh. Everything amounts to equal, minus costs.

Diversity, multiple markets, kinda boils down to the same thing.

Outliers? Please, dont tell me i've been reading books about jammy barstewards?

not sure I follow you here...

 

[random12345]

I don't know about many intra day traders, but I found it both amusing and bizarre to find that the trading style I had developed in the evenings by observation, luck and educated refinement over a year or so turned out to back and forward test better than other iterations around the same theme and I barely changed a thing after taking a more technical programmatical approach (quite a bit later on)...

Note that for a daytrader doing backtesting, when I took a break from my dayjob, I sampled a pitiful maximum of 15 profitable (out of 15) days using IG's (rubbish?) tick data as I had considerable time and money restraints. This has worked for the subsequent 423 working days. Naturally I could get a drawdown, though it would have to be 12,691 pts in one go to put me in the red at this point...

No doubt someone will insist this is possible.

It's a cliche, but the biggest struggle is getting around the psychology of "maybe this is the day it won't work..." when you're 30 pts down off the bat @ £300+ a pt when you're really not ready for that level... it can be tough. I didn't sleep a wink for about the first 6 months... even though I was raking it in. I felt psychologically ruined despite winning every day for that period. It never ends, the feeling of impending disaster, even when you get past the point of being able to reasonably conceptualise how that might happen.

The only daily drawdowns I incur are when my ADSL goes down, which is definitely the most random factor out there once you have a workable approach...

I feel like I've added nothing at all to this conversation. Literally nothing. Sorry. Was a quick day today and I'm bored. (see 6:20am on the EURJPY...)