How long before you toss away your strategy ?

attila low

Active member
152 4
Hi!
I have being testing out a couple of strategies and i get that one should let their system run for a while so that the results are not just noise or chance but the merits of your strategy (like tossing a coin 10 time and getting 9 tails , which doss not mean that the coin is not 50/50) but how can you know that its a failing system, how long do you have to stick to it . to know objectively that it dose not preform as you wish (hope this makes sense ).
 
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Trader H.C.

Junior member
39 5
Hi,

Good question. I also asked the same when I first started trading systematically.

Here is the best answer I've got from one of my mentors:

In behavioral strategies, you are reactive as your performance (both P&L and hit-rate) gives you an idea of how's the strategy doing. The answer to your question is to compare the performance against the backtested performance (using a walk-forward optimization). If your performance or the statistical behavior over a statistically significant period (maybe over a period of 20 or more trades) does not look like what you got in backtests, your strategy might be dead.

In market prudent strategies, you are proactive as you are not making decisions based on P&L. You have a separate decision layer. A simple example is: "You long or short a tech stock based on the amount of chat activity in the forums". Thus, when the forums activity dips, you close your long trade, regardless of performance. You are making a decision based on a non-P&L layer. In this case, if the relationship between your decision layer and asset breaks over a statistically significant period, you know that your strategy is dying.


If you find this useful, consider subscribing to my channel for more related content. :)
https://www.youtube.com/channel/trader_hc
 
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attila low

Active member
152 4
Hi,

Good question. I also asked the same when I first started trading systematically.

Here is the best answer I've got from one of my mentors:

In behavioral strategies, you are reactive as your performance (both P&L and hit-rate) gives you an idea of how's the strategy doing. The answer to your question is to compare the performance against the backtested performance (using a walk-forward optimization). If your performance or the statistical behavior over a statistically significant period (maybe over a period of 20 or more trades) does not look like what you got in backtests, your strategy might be dead.

In market prudent strategies, you are proactive as you are not making decisions based on P&L. You have a separate decision layer. A simple example is: "You long or short a tech stock based on the amount of chat activity in the forums". Thus, when the forums activity dips, you close your long trade, regardless of performance. You are making a decision based on a non-P&L layer. In this case, if the relationship between your decision layer and asset breaks over a statistically significant period, you know that your strategy is dying.


If you find this useful, consider subscribing to my channel for more related content. :)
https://www.youtube.com/channel/trader_hc
what us walk-forward optimization ? , if your p and l differ significantly when compared with the back testes (assuming that the back tests were done objectively ) the issue is with you and your psychology and not the strategy so the strategy should not be discarded , IMO
 

NVP

Legendary member
37,549 1,997
i ditch most trading videos I watch inside 2-3 minutes ....and most of that is normally some idiot talking about a no lose strategy .....
 

Adoralmeena

Member
75 7
I think that you don't have to dwell on it so that you are afraid to start real work and can't go beyond the usual limits. I think that in any case you need time. But there's still a lot that depends on the activity of your work. In general, about 1 month is enough for you to test your hypothesis/strategy/approach precisely and comprehensively. You can check everything on a demo, and in this case it is very important to track the statistics so that you can understand exactly in which situations it really brings positive results, and in which cases it makes no sense at all. And there are such moments in any strategy. And you can deal with all this as soon as possible Just do not try to embellish the results. Keep an objective view of the situation.
 

TickCOM

Member
89 8
Traditionally you stick to a strategy till it stops working.Then develop new ones. Use forward testing.

Conceptually today, you do it in a different manner, where you do not forward test - excpet for the purpose to test if the program running the strategy works as expected.
 

Runepick

Junior member
17 1
This is actually a complex issue, because much depends on the complexity and functionality of the strategy. Because some of them are aimed at everyday trading. And some of them can be called quite specific, so we can only use them in certain conditions. And this restricts our actions to some extent.
I agree with the opinion that this testing of a strategy will not require you to take a huge amount of time. But I think that you will be able to feel for yourself when it starts to bring you good and reliable results. And then you can always combine testing with real work, because you should never stop, because moving forward is the basis of the trader's development.
 
 
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