Why do people not backtest their systems?

J

jcl365

0 0
There are many systems described here but it seems almost all are not backtested. I see nowhere some tests or performance statistics. I wonder why people trust their money to untested systems? How can someone know that his system is profitable without having backtested it over at least 4 years? A backtest is no guarantee for a profitable system of course, but not backtesting seems to be a guarantee for an unprofitable system.
 

Trader333

Moderator
8,610 936
It is not possible to back test every approach to trading. For example, how would you back test a "basket trading" or a DOM strategy ?
 
J

jcl365

0 0
Hmm, scalping or DOM strategies would be indeed hard to test. But basket trading, or the systems posted here that work on time frames higher than 1 minute and don't use any special intuition for entering or exiting trades, should be relatively easy to backtest IMHO.
 

BeginnerJoe

Senior member
3,329 350
Why bother back testing when you can forward test on demo ? But both approaches are like testing punches against a dummy that doesn't punch back. Why people believe the market is a dummy that likes to give you money as if it's an ATM I will never know. But let me give you a secret: the market is alive, and not only does it punches, it also kicks. Its kicks are always 100% accurate and straight in the b*lls. Now, you still want to come use the ATM do you ?
 
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startuprob

Newbie
5 1
Joe, as you've said, neither approach is perfect. Backtesting is faulty because past data isn't necessarily indicative of future activity. Demo trading is faulty because it's a one-way street of information instead of actual trading which is a two-way street. All of that being said, no model is perfect but some models are useful.
 

Splitlink

Legendary member
10,850 1,233
It is not possible to back test every approach to trading. For example, how would you back test a "basket trading" or a DOM strategy ?

Some people love backtesting. Basket trading and DOM strategy? You have given two great ideas to work on over the weekend! Not me, I might add.
 

BeginnerJoe

Senior member
3,329 350
Joe, as you've said, neither approach is perfect. Backtesting is faulty because past data isn't necessarily indicative of future activity. Demo trading is faulty because it's a one-way street of information instead of actual trading which is a two-way street. All of that being said, no model is perfect but some models are useful.

To believe a one way street system is dangerous in a 2 way street world. A head on collisions is guaranteed pretty much immediately. How many can survive a head on collision, and why would anyone knowingly put themselves in that position ?
 

startuprob

Newbie
5 1
To believe a one way street system is dangerous in a 2 way street world. A head on collisions is guaranteed pretty much immediately. How many can survive a head on collision, and why would anyone knowingly put themselves in that position ?

Nobody can predict the future, but I'm a big believer in using whatever resources one can to give them an edge - that's why I backtest. The problem with most backtesting platforms is that they're insanely difficult to use - that's why I use QuantBlocks.com
 

Shakone

Senior member
2,458 665
I guess a lot of people don't like backtesting because they don't want to face the truth that their strategy has no edge. Then there are others that can't backtest because of the strategy, and there are others who don't believe it has much value.

I think pretty much everyone does some level of backtesting, even if it is just the flawed scrolling through a chart and seeing type.

If you're going to backtest, why 4 years? Are things now similar to how they have been for the past 4 years? Does 4 years encapsulate all the market conditions?
 

startuprob

Newbie
5 1
I guess a lot of people don't like backtesting because they don't want to face the truth that their strategy has no edge. Then there are others that can't backtest because of the strategy, and there are others who don't believe it has much value.

I think pretty much everyone does some level of backtesting, even if it is just the flawed scrolling through a chart and seeing type.

If you're going to backtest, why 4 years? Are things now similar to how they have been for the past 4 years? Does 4 years encapsulate all the market conditions?

I think the period of time is relative on a number of circumstances:

Are you using tick data, or just end of day?
What's the strategy? (is it using a small window or long?)
What's the Max drawdown? (ie Win:Loss Ratio)
etc.
 
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BeginnerJoe

Senior member
3,329 350
Nobody can predict the future

I can. I predict in the future, the market is there to make money from you and people like you. In the future, the market will not become an ATM for people to enter PINs on. See ? The future is very predictable.


that's why I use QuantBlocks.com

I reckon the real reason is that there's more money to be made from vedoring than trading.
 
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NVP

Legendary member
37,588 2,011
There are many systems described here but it seems almost all are not backtested. I see nowhere some tests or performance statistics. I wonder why people trust their money to untested systems? How can someone know that his system is profitable without having backtested it over at least 4 years? A backtest is no guarantee for a profitable system of course, but not backtesting seems to be a guarantee for an unprofitable system.

The world of trading is full of thousands of ideas and approaches JCL.....so do whatever gets you though the night .and who cares what others think ;)

there is no ultimate right or wrong .....except the market itself

N
 

startuprob

Newbie
5 1
The world of trading is full of thousands of ideas and approaches JCL.....so do whatever gets you though the night .and who cares what others think ;)

there is no ultimate right or wrong .....except the market itself

N

Great point - markets don't lie.
 

BeginnerJoe

Senior member
3,329 350
markets don't lie.

Presumably this will be demonstrated to be true by QuantBlocks.com ?

Will I get a commission for the help in vendoring ? I am unable to make my 0.0001 cent today from the market given that the EUR is twisting and turning like someone on PMT. So any alternative source of pennies will be welcomed.
 
 
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