Sorry. I am sober now. I explained myself as best I could in my impaired condition. If you had been smashed yourself when you read it, you would have understood it like I do. I very much admire your posting and your grasp of backtesting. You are doing a great job of educating ET to its virtues.
, i am using different currencies and different time frames. and they are still 2 setups. hhhahahha. this is the catch.!!
Can you filter if volatility goes up over xx? Or put a max loss per trade, max loss per week or month?
The algo should work on the lowest time frame. For now i am testing on 1m charts with the final goal is to work on the 1 second time frames without any need for charting. The solution of putting max loss per trade is considered now but i am thinking of something not reducing profitability too much.. Actually, your two solutions are very good specially the volatility filter.. Howerver, i am thinking to use Hedging but still searching how
Are you trading forex or stocks? If Fx, are you paying the spreads in your backtest? To me, this as always been that major obstacle to profitability on the shorter time frames.
McGene - You need to tell us what you are trading (stocks, options, forex, futures, etc.). Also as stated above, this is VERY important... Are you factoring in fees AND spreads? Are you sending market or limit orders? Are you backtesting based on PRINTS or based on Lev2 book? Do you have size or just Bid/Print/Ask? Are you trying to provide liquidity? If so are you waiting for the print/price to move through your price or just assuming you got a fill at your price? If you are sending MKT are you adding a few cents per fill assuming someone is going to hold you there and screw you over? Backtesting should be done very pessimistically. If possible back test time periods that you have run live (not 100shs, run fully live) your strategy and play around until you know where the approx 1:1 backtest to real life is (for that day) and set your backtest even more against you over a longer time frame. Seems like if you have 1-2 entry conditions that go against you it may be something as simple as a stop loss? Do you have profit targets with trail stops or just trail stop from the getgo? How many variables do you have? Sorry for so many questions - that was just a quick "off the cuff" ramble about the basics. Good luck-
I am trading forex and because i am testing on the 1 minute , yes i am paying the spreads and it seems my ATS is still profitable with that. However, i agree with you 100%, things might change when i go to second and subsecond time frames with paying transaction costs. Still, i believe there are more profitable land down there with less risk.. but not proved or even tested. Thank you for sharing
I believe i am still in the beginning of the developing stage of my ATS. So, most of the answers with these questions will change with time. For example, using market or limit order?hmm, surely, i will switch to limit orders if i am going to apply my strategy on very short time frames. My backtesting till now is very crude and i cannot say it is acceptable for professionals. that is why , i am trying to exploit it by using different code, different software, different historical data, and even more powerful hardware. You will call me naive and crazy if i said i don't have usual stop loss but i play with disastrous one only. However, using the trailing stop loss is always luring me. Thank you for your advice about optimum backtesting and optimization.. I would appreciate if you share me with some documentations or medias about how to do this properly. Thank you all