Backtesting, demo, and live trading

Discussion in 'Strategy Development' started by trelco, Oct 5, 2011.

  1. trelco


    What are the differences?

    For an automated system they should all perform roughly the same if the rules are followed explicitly, correct?

    We have all heard 90% of traders lose money, so I am trying to find out why so many are profitable in demo and then lose.
  2. Three main reasons:

    1) there's no emotional involvement in demo trading. Who cares if you lose money? People get nervous when trading real money.

    2) some demos don't use realistic fills, so even if you do everything mechanically indentical in a live account, you get worse fills = potentially lose money.

    3) people will backtest their system and curve fit it like crazy and then it won't be profitable going forward. Live forward testing is a good idea to help avoid this.

    But the main reason most traders lose money is because they don't have a profitable methodology. A lot of people say "it's the trader, not the system." They are wrong. It needs to be both. You have to have a profitable system and then you have to be able to follow its rules.
  3. pwrtrdr


    Agree with what you are pointing out, but also what I have found most important is to figure out a filter that will direct you to "turn off" a system because the probabilities simply are not that good any longer

    When I hear that someone was making money then the stategy went bad, they think it is over. Its not, most, if not all strats go in and out of profitability.... they have to. Its about knowing when to use what method or model.

    Only tru printing press is front running orders or information of course!!

  4. trelco


    I found this kind of funny.

    So basically people need to find a profitable system, stick to it, and set how to tell when to retool/switch the system?

    There are no problems with brokers front running or disseminating pending stop/entry orders?

    Also, what size do you become a target for larger market participants?
  5. trelco


    No one wants to answer this?
  6. trelco


    Anyone have an answer to this?
  7. lindq


    You should be so lucky that anyone would care.
  8. trelco


    Thanks for the answer. Glad to hear that, I heard a lot about bs tactics in FX and I assumed other markets would have to be at least a little similar based on the history of trading.
  9. Most of the broker nonsense occurs in Forex.

    You become a target for other other market participants when you trade larger than anyone on this forum. Even with a low 7 figure account I doubt anyone would care, unless you're trading something super low volume where you're moving the market.

    You can probably throw around hundreds of ES contracts at a time without anyone really batting an eye.
  10. pwrtrdr


    :D :D :D :D

    #10     Oct 8, 2011