has anyone ever backtested a method and then traded it profitably?

Discussion in 'Trading' started by 1a2b3cppp, Jul 11, 2018.

  1. It seems like everyone on this forum is like "i backtested and then it didn't work" or they're like "i don't backtest."

    Just postulating.
  2. Disciplined use of walk-forward optimization has always translated into real life profitability for me. I would not trade based on a simple in-sample backtest. Curve fitting kills.
  3. maxinger


    backtesting is for demo trading. some people use computer to digest millions of gigabyte data and complex formulae. some simply use paper and pen to record their performance.
    demo trading is 99% technical.

    live trading is 99% emotional / mind management.
    so nothing to do with backtesting.
    Peter10 and _eug_ like this.
  4. sle


    Let's see. There are large funds that deploy billions of dollars on the basis of backtested strategies and there are people on Elite Trader that seem to be against it.

    The whole idea of backtesting and systematic trading is that you take your emotional state out of the equation.
    alfa8, jys78, murray t turtle and 5 others like this.
  5. wrbtrader


    Yeah, there's a lot of people that have backtest positive results and then they move directly into real money trading to only fall apart (loses).

    The problem is that these particular traders skip the critical "simulator trading" phase in between the backtesting & real money trading.

    You gotta do one or the other or both...backtest and then simulator trading.

    Backtesting is where you find out if your method works or not work and other types of critical statistics that can be used at a later date. Simulator trading then allows you to simulate using the trade method in the actual broker trade execution platform to begin ironing out the wrinkle areas...kind'uv like learning how the car works via test driving alone on the race track prior to driving it in real traffic with lots of real cars racing around the track in a real car race.

    Yet, I think the mistake gets further compounded is that traders do not use a professional trade journal software with their simulator trading to get the needed quantitative statistical analysis to identify other problems (other wrinkles) prior to real money trading.

    If you're not using an automated trading system...psychology will impact your trading results. There's a lot of trade journals here at the forum that are verification of such...traders using a backtested trade method with positive expectancy to only then fail when they traversed into real money trading. Simply, backtesting will not reveal any flaws & weakness in you as a trader and simulator trader will reveal only the minimum flaws & weakness in your trade method or the minimum about how you as a trader will apply the method in certain types of trading conditions...only real money trading will reveal the flaws & weakness in you as a trader that interacts with the market.

    You will find out who you really are as a person in the financial markets. Scary thought for most !

    That's the primary reason why two different traders using the exact same trade method while trading the exact same trade instrument will always have different trading results. In fact, in some cases, the difference can result in the extreme...

    One trader being profitable and the other trader losing just because of the trader itself is arguable the most critical aspect...maybe more important than the trade method if that specific trader has outside issues impacting his/her trading from their personal life. Questioning or putting in doubts about the merits of backtesting and the merits of simulator trading when the real issue is the trader.

    Thus, its you...you're arguably the most important factor for those with others issues that's psychological...stress management, discipline and other mental aspects of trading.

    Why are you so important ?

    There's other important things that will impact your trading results beyond the trade method itself...your experience, stress management (decision making when in stressful trading conditions), trading environment at home, market conditions, money / risk management, capitalization just for starters...

    You got to manage all of that into a working team while using your trade method. :(

    Now back to those that thinks only the trade method matters and everything else is not important...

    Backtest ---> Simulator Trading w/ Professional Trade Journal Software ---> Real Money

    The stats from the backtest and the stats from the simulator trading with professional trade journal software can give you confidence but simulator trading alone can not get you ready for real money trading. You gotta continue with the stats after the backtesting and then continue maintaining the stats during real money trading...

    The latter is important because market conditions do change every year and you will need the stats for feedback to help you adapt to the changed market conditions to minimize drawdowns.

    Why take a chance via not doing backtesting, not doing simulator trading and not documenting/journaling your trading via not using a professional trade journal software for those critical stats that will help you adapt when market conditions change ???

    Remember this...the big boys that move the markets. They use systems that they've put a ton of money into developing including a lot of energy into hiring the right people to implement those systems in the markets...

    Do you want to take the chance and trade against that via your trade method if its not backtested and has not been simulator traded without any documentation for the stats ???

    Thus, you gotta do the work or else trading is just a hobby or academic brain tease.

    P.S. I think some traders avoid the psychology factor in trading via developing an automated trading system. Yet, reality, outside personal issues (if its serious enough) still do in fact impact these traders too but not as much in comparison to traders using trade methods that's not automated.

    Last edited: Jul 12, 2018
  6. ehsmama


    yes I do..And it Works well for me
  7. Robert Morse

    Robert Morse Sponsor

    I think backtesting has enormous value if the results are negative. If they are good, they require forward testing, where you have no knowledge of market trends, and then real money testing with small lots.
  8. kevinkdog

    kevinkdog Sponsor

    Backtesting is useless for most people since they do it wrong. And there are many ways to do it wrong.

    The annoying part is that even IF you backtest correctly, you can still lose money. Past performance no guarantee of the future, for sure.
    digitalnomad and Xela like this.
  9. Robert Morse

    Robert Morse Sponsor

    I expected you to follow up that comment with the right procedure. Would you like to add that? Maybe just an outline teaser.
    murray t turtle and userque like this.
  10. Almost everything will work on the daily timeframe, almost nothing will work on 5 min timeframe.Did i just backtested it for you?
    #10     Jul 12, 2018