"Reliable" in trading is more a matter of decision than a fact. At the moment I'm not interested in other markets, given that the equity curve produced using just one market and one strategy is linear enough. You don't need many markets/instruments to trade successfully. However, as for diversification, a stock index like the Nasdaq is based on 100+ individual stocks, so it's already quite diversified.
Not true, unfortunately. You can very well be fooled by intraday data. Markets do change. Just for fun, I ran the 13-year backtest on my previous strategy, the one that I was using at the beginning of this journey (see the beginning of this thread). The graph below shows the results. I had developed this system using only the 3-4 more recent years of data, to the right of the red line, and used it in real trading roughly after the blue line.
I can see your point , I'm not saying markets don't change , quite the reverse , I just think if you back tested on say 3 minute data from last couple of years , the patterns etc are likely ( ok I'm not going to stake my house on it) to have changed less , be more repeatable, than daily data going back as many bars , ( many years ) as I suspect things like computers and availability of information etc are more likely to have changed things. ( in short , fundamental reasons for changes in market behavior are more likely over a longer period), this is just intuition , not fact . P S does the above graph have any correlation to a bull market , if it does that would be a concern .
The above graph plots trades occurring on 5-min bars, constructed off 1-min data points. When I only traded EOD, many years ago, I saw the same out-of-sample misbehavior in the systems that I tested, again and again. So i don't believe intraday data can offer any greater warranty or safety over EOD in that respect. The Nasdaq has been constantly rising over the last decade and more, on average, even to the left of the red line. So I don't think this is a key factor regarding this system.
I stand corrected then , it certainly looks as if something has changed , there's an obvious point where this happened , any ideas why?
Honestly I have no idea. However, that system was clearly more overfit than I cared to admit. Not necessarily a bad thing, as it served me well for several months.
Worth mentioning that October could also have been a winning month, if only I hadn't made the stupidest mistake a system trader can do, overriding the system. On October 11 I decided to close out manually a few positions, to secure what they were winning. I was worried about the ups and downs of previous days. Of course, the index rallied strongly the following day. If I had kept my hands off, the bot would have nailed it and earned ~$4000 more. Again, I did this worried more about my son's money than mine. But he didn't even blink at the subsequent big loss ($5200). So he probably taught me a lesson, as it hardly hurt me either.
Classic mechanical trader's mistake. I bet it happens even to guys who've been in a business for 20-30 years. There are so many variations of this, some look less obvious than others. For instance - I used discretion to reduce a size by 30% for one of my short systems end of August. It turned out to be a best performer for last 2 months almost beating my best long system PL%-wise, even though long one was running on a larger position size. If I really think about it, my override cost me ~5k$ over last 2 months. It is just easier not to think about it, for this particular variation of the same mistake Thank you for posting, I'm looking forward to updates in your journal. PS. That's a great attitude your son has! Val
Yeah, of course every mistake is such in hindsight. Should the index not have rallied, I would have patted myself on the back. Yet risk has to be mitigated. Especially when using leverage. On the other hand, if you are truly confident in your system, you should trust and not override it. It's a delicate balance to be maintained. Yes, my son has a well developed entrepreneurial vein. I guess we're learning from one another in this journey. Thank you for your appreciation, I'll keep posting.