How long before you toss away your strategy ?

attila low

Active member
153 9
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 ).
 

Trader H.C.

Junior member
39 13
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
 

attila low

Active member
153 9
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
 
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NVP

Legendary member
37,747 2,093
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 .....
 
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TickCOM

Active member
113 16
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.
 

TickCOM

Active member
113 16
Can you always analyze your strategy in order to determine where it needs to be improved?
Sure, it is common practice by hedge funds to update their automated strategies, for intraday strategies some make a weekly update, others 2-4 weeks. Which imply a strategy has a base idea, and a set of udjustable criteria - which further imply one would have a portfolio of different strategies running having same base idea. To do this in a operational manner, you need an IDE which support this.
 
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Pat494

Legendary member
14,621 1,577
Big draw downs are bin fodder.
 

Henow1969

Well-known member
267 27
I think if we are using a strategy and it was working in the past but now it is not working so we should make a new strategy and test before start completely.
 

Akwin

Junior member
36 3
When making your plan, start by calculating reward and risk levels prior to entering a trade, then use those levels as a blueprint to exit the position at the best price, whether you're profiting or taking a loss. Market timing, an often misunderstood concept, is a good exit strategy when used correctly. Stop-loss and scaling methods also enable savvy, methodical investors to protect profits and reduce losses.
 

MariaRose

Junior member
20 2
I always back-test my strategy on the different time frames before opening any position. I go with the results from my testing. Although it is a time taking process but this is the only way you can be sure about your plan.
 
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mpups

Experienced member
1,024 143
I mostly trade with the same strategy till it brings me consistent profit and when it stops or when I see a huge downfall in my profits, I make a new strategy and move on from the old one.
"huge downfall" makes me think its due to poor risk management but I'm not sure what you mean
 
 
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