So I have programmed and back test a few intra-day (5, 15, 30, and 60 minute charts) trading systems on my development platform.
My problem is I do not know how to evaluate the performance of the trading system I am programming and back testing besides looking at the net profit.
A few questions please:
1. Is profitably across multiple instruments prove a strategy robustness? See the attachment please. Strategy shows profits for EMD and ES but not so much for other instruments.
2. Why is Max Drawdown so important? I understand the meaning of it, but why important from a money simplicity understanding? Why would a client be interested in this so much and not annual profit?
3. Can you please recommend a book for evaluating intra-day trading systems?
4. When you evaluating a trading strategy performance what a few performance you look at for a quick review before moving forward to other validation methods?
5. How do you know when you have a system that have high odds of profitability in the future?
Thank you kindly.
I looks like your backtest is from 2007 to 2010. That's way out of date. See if you can get more recent data.
Yes, but it's highly unlikely that you'd find something that works well for multiple instruments.
Because Max DD is a measure of risk. What the trading system should maximize is not annual profit, but the risk-adjusted annual profit.
Sharpe ratio remains the golden standard in performance evaluation. There is a lot of (deserved) criticism of it, and eventually you may want to use your own performance metrics, but Sharpe ratio is a good start.