No ape-ologies unneccesary. I had low hopes for this tread, and I was not unappointed. But I lernt sumpin. Never more will I buleave an ET poaster who writes "I backtested..." What could be simpler? Makes me feel like a fucking genius. Verily there are marvelous subletees in backtesting. But first yew must muster the basucks.
Feng, I have built approx sixty good systems in my years, as my experience expanded, my sample size increased to current 3000 min going back a min of ten to fifty years for long term (one trade a day max) and now ten to fifteen years for day trading, the problem with anything tested of one to two years is average daily range contacts and expands last couple years hugely. Markets drop very fast and daily ranges are much bigger than when markets rise. Markets rise sort of herky jerky, lots of false moves along the way, and of course there are reasons for that as well. So I found if you can divide up whether in a bull market or bear market, you can test differently. Case in point, when markets were declining steadily, bullish methods lost money, when ES bottom, bearish methods lost, so going over less than ten years on a method that produces so few trades, you don't have a clear understanding if it is even a viable method. You don't know the depths of drawdown, the number of days to new equity highs, and not enough data for MAE and MFE. Your method sounds like some similar methods I have encountered back in late 80's, they made money overall, but not very smooth equity curves. If you have a low losing percentage, you can always average down and make money on what might be a small lose or breakeven trade, I do this all the time, I don't test so much for big profits, I am more concerned on not having many losing trades, so my money management rules are geared to not losing. Where too many young traders make methods for huge profits, there are usually trade-offs of larger drawdowns. I would advise learn all you can from the winning trades, how much price went against them and the mean of this number can help you define best protective stop. Once you can optimize everything you can find out about your winning trades, then you can go on to redefine your entries. Do you notice a consistency of so many losing trades in a row and there will be a mean for this as well. If you see strings of three losses in a row, retest if on 4th trade to double up size. Or if there is a consistent drawdown, at this point you can increase size. I have one current method where if I have a losing trade, I skip the next two trades of the same signal unless ES goes so many full points in same direction. Also, after a winning trade, do you normally have a string of winning trades? Toby Crabel of Opening Range Breakout, was very good at defining at the time, so many up/down days in a row and what percentages of next day. He was one of my early mentors back in 1989, he was working for a RB&H brokerage, owner traded cattle, so many of his studies were originated to concentrate on live cattle, then ventured out onto Beans/Bonds/ and then S&P, but he tested for so many up days in a row, etc... Volume should be in place and used to reduce drawdown, but only if you have tested and know how to use volume as an aid, Volume on futures is unlike volume for stocks, ends of moves produce Accumulation and Distribution. Good Trading.