jmreeve said:Some general system testing Guidlines:
1) Try to make sure you test with enough data to give at least 50-100 trades in your testing sample to give a reasonable level of confidence in the results.
2) Even if it is a very short term system, test over at least a years worth of data as markets often change short term trading characteristics suddenly on a longer time frame.
3) If you have any optimisable parameters. Optimise these on the first two thirds of the data and when you have finished and found the best parameters. Test on the last third of data to see if they still work. I would also recommend then optimising on the last 3rd of data and if the optimum parameters are very different from the first 2/3rds or the system is profitable for a lot less ot the parameter settings then be very wary.
4) Don't have more than a few optimisable parameters and optimise for system stability and not for best profit.
5) If the system looked great in the past but is looking like it is starting to perform less strongly on recent data also be very wary.
A useful book on system testing is "Design, Testing and optimisation of trading systems" by Robert Pardo
thank you for the great post. Is there a time fram that you use? For example, do you keep testing every 3 months to see if the probability of the system is still constatnt? Or would every month be better?
jmreeve said:I so I can see how the performance develops on a day-by-day basis and keep and eye on how well it is working.
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