Your 4 month data backtest is completely invalid because the data set is too small ... and the market has been like a Bull in a China Shop, it just wouldn't quit. Of course I understand that traders try to curve-fit their systems to get the optimal percentage win (psychology), but we're going to need to see at least more stats on the two over a longer period of time under varying market conditions before an intelligent decision can be made regarding the two. Best Regards, JJ
Hi Steve. Thanks for posting. I think you have 250 trade opportunities confused with 250 points of sample data.
Don't know'em and never met'em, but I'm with Vince1 100%. If you trade the YM with your current equity levels you will drastically cut your risk and continue to make good profits while continuing to move up the learning curve (a process that takes years) and becoming not only a good trader but a good programmer as well, an awesome one-two punch in this game if ever there was one. *** I had already come to these conclusions after I saw your original post last night, but I let these guys comment, because I didn't want to come across as being negative. The minute you realize trading risk is the optimal way to trade, (notice I didn't say stop size) and minimizing it is the key to good trading you're going to start making really good headway. Best Regards, JJ
Hi Steve. For an intraday system, are you saying that you would not be satisfied with the prior 4 years of data for a test period? I'd like to hear your thought process behind this, since to me it seems that the market has changed into a completely different beast than it was just 2, 3 or 4 years ago, and vastly more if you go back further than that, even if you set aside the biggest change of all (the move from 6 cent to penny spreads for stocks). How relevant to a daytrading strategy can results obtained from testing on data that old be and why would you feel the need to require it? Specifically in Frost's case, he says that he has 250 data points over 4 months so I'd assume that he has around 4,000 over the 4 years, which to me seems like enough to demonstrate a reasonable level of robustness/confidence. Looking foward to your comments.
A picture may be worth 1,000 words, but it's worth $100,000 dollars in this case. Once again, we've got the run-away Bull calling the shots since '03 (and folks think Bush didn't know what he was doing ...). *** With but a few suggestions there are several folks on this forum who could turn this system around and make it whiz-bang knock your socks off. Without a doubt, I'd say Steve is one of them. Act like you're serious about getting it together this time Frost, recognize their contribution, and maybe more will post here. Regards, JJ
If you are doing position trading than I would obviously definitely agree that the trend on the monthly chart as you have shown should be taken into consideration. For daytrading systems I'm inclined to say that this is having little impact on any possible curve-fitting. I also think that any tiny degree of curve-fit that might possibly work into the daytrading results based on a monthly trend would be far out-weighed by those due to changing market dynamics from years ago.
The reason the system appears to be profitable is that it caught a trend day. If you remove that strong trend day trade, the system is extremely unprofitable. However, if you remove any other day, the system still appears to be profitable. What this means is that the system have will have to contstantly try to catch the next trend day to maintain any sense of profitability. Notice on two days the losses were very high, almost as much as $350 per day, if you review those days on your charts you will see that they were range-bound days, and these outsize losses tells me that the system got chopped to pieces on those two days. In short, yes, I think there are a number of folks who could make improvements on a system that may have 3 or 4 (at best) really profitable days a month and the rest are whip-saws with outsize losses. Best Regards, JJ edit: As it is, the system relies to heavily on the luck (I say luck because he can't anticipate when they are going to happen) of catching a trend day. If the system misses just one in a month of trading it's going to be shot.
Case in point, if you remove ANY of the profitable days from the system it will quickly approach levels of drawdown which will force him to stop trading it. I have a feeling that this is what has happened in the past, and this is the primary issue that Frost is seeking to correct. While my thinking is critical and writings are to-the-point, these actually are universal issues which are faced by all traders who trade directional strategies. Now that we've isolated the problem (assuming anyone admits that there is a problem with the system, and that this is it) it is by resolving it that the system will achieve much greater profitability and become a truly successful system. 5% With Best Regards, JJ