System Analysis

[the pro]

Hi Guys

Can anybody steer me towards a book or somebody who has written an article on the subject of "back-testing" a system. Not on how to do it, necessarily, but on how to interpret the results and compare one system to another.

Only constructive feedback - please

Any suggestions

Many thanks

 

[numbertea]

Hi Guys

Can anybody steer me towards a book or somebody who has written an article on the subject of "back-testing" a system. Not on how to do it, necessarily, but on how to interpret the results and compare one system to another.

Only constructive feedback - please

Any suggestions

Many thanks

I had similar questions many years ago. My favorite book... Google. This is not sarcasm. Pages are just spread around the world. I programmed my own system to do my backtesting and trading. I just couldn't find a ready made product that was flexible enough. I trade the ES and when backtesting I figure in 1/4 point slippage against me with every trade. That's 1/2 point per round trip. If in real life I do better than that it is a gift. The right information will never just drop in your lap, don't give up looking.

Cheers

 

[the pro]

I had similar questions many years ago. My favorite book... Google. This is not sarcasm. Pages are just spread around the world. I programmed my own system to do my backtesting and trading. I just couldn't find a ready made product that was flexible enough. I trade the ES and when backtesting I figure in 1/4 point slippage against me with every trade. That's 1/2 point per round trip. If in real life I do better than that it is a gift. The right information will never just drop in your lap, don't give up looking.

Cheers

Hi Numbertea

Thank you for your response. It wasn't quite the answer I was looking for however.

It's amazing when you say "constructive feedback only, please" nobody replies. Perhaps I have learned something after all.

 

[Pat494]

Hi Guys

Can anybody steer me towards a book or somebody who has written an article on the subject of "back-testing" a system. Not on how to do it, necessarily, but on how to interpret the results and compare one system to another.

Only constructive feedback - please

Any suggestions

Many thanks

You will probably accuse me of being sarcastic or simplistic but the only thing that matters is your profit or loss. Everything else is heading in that direction, but that is the bottom line.

 

[the pro]

You will probably accuse me of being sarcastic or simplistic but the only thing that matters is your profit or loss. Everything else is heading in that direction, but that is the bottom line.

Thanks, I appreciate your reply, but how you make the £50,000 is important to me, would I go through a 95% draw-down to get there - No.

i would also guess that I wouldn't be the only one either.

Thanks anyway,

 

[numbertea]

Thanks, I appreciate your reply, but how you make the £50,000 is important to me, would I go through a 95% draw-down to get there - No.

i would also guess that I wouldn't be the only one either.

Thanks anyway,

Ok, that is true. I can tell the things I am looking for when I backtest new ideas. I trade intraday and hold no positions overnight. Max drawdown in a days trading. Max drawdown in a trade. Max profit in a day and a trade. Over all profit for week, month, and 3 month periods rolling on every day so that a true worst and best case scenario can be established. Number of trades per day. Number of losing and winning trades.

Also: frequency bar chart of winning and losing amounts per amount range. It helps me see the overall result when comparing system changes.

Cheers

 

[the pro]

Ok, that is true. I can tell the things I am looking for when I backtest new ideas. I trade intraday and hold no positions overnight. Max drawdown in a days trading. Max drawdown in a trade. Max profit in a day and a trade. Over all profit for week, month, and 3 month periods rolling on every day so that a true worst and best case scenario can be established. Number of trades per day. Number of losing and winning trades.

Also: frequency bar chart of winning and losing amounts per amount range. It helps me see the overall result when comparing system changes.

Cheers

Thanks for the update. My main reason for the question is that I have developed several systems, that I have tested through a programme called "Market System Analysis" it spews out a load of stats, but there doesn't seem to be a book or paper that guides you through the numbers and what they actually mean for comparison purposes.

 

[numbertea]

Thanks for the update. My main reason for the question is that I have developed several systems, that I have tested through a programme called "Market System Analysis" it spews out a load of stats, but there doesn't seem to be a book or paper that guides you through the numbers and what they actually mean for comparison purposes.

Just decide what stats will improve your bottom line and concentrate on them one at a time. Net profitability is my end game though. There is too many combinations of factors to give a standard business model for backtesting.

Cheers

 

[Pat494]

Thanks for the update. My main reason for the question is that I have developed several systems, that I have tested through a programme called "Market System Analysis" it spews out a load of stats, but there doesn't seem to be a book or paper that guides you through the numbers and what they actually mean for comparison purposes.

Why not list what seems like the main stats of your programme and I expect someone here will give his opinion on which are better than others and why ?

 

[the pro]

Why not list what seems like the main stats of your programme and I expect someone here will give his opinion on which are better than others and why ?

Hi Pat

Thanks for your reply. Personally I wouldn't use the forum for this kind of feedback, i think I would be left more confused than when I started.

Just can't believe that there appears to be so little published material on the subject, regarding these stats which i personaly think are important at least for analysis purposes and yet here I am having trouble finding someone to be able to quantify them from a knowledgeable source.

 

[Shakone]

the pro, as a first step, you could look here

http://www.seykota.com/tribe/risk/

You could also look in 'new trading systems and methods' by Kaufman (but it's a 1000 page book, and probably only 50 pages will be relevant to what you're doing).

A lot of books will go into this area, but not in much detail, and it depends what you want. Depending on how comfortable you are with maths, you can just get a good statistics book and use that.

 

[the pro]

the pro, as a first step, you could look here

http://www.seykota.com/tribe/risk/

You could also look in 'new trading systems and methods' by Kaufman (but it's a 1000 page book, and probably only 50 pages will be relevant to what you're doing).

A lot of books will go into this area, but not in much detail, and it depends what you want. Depending on how comfortable you are with maths, you can just get a good statistics book and use that.

Thanks a lot for the info, i'll take a look.