I'm not trying to be sarcastic. I seriously have no idea what you are talking about. Must have been absent from class that day. ;-) I appreciate you patience with me, but can't offer any answers until I understand this further. regarding the "precede" signals, I tried to clarify that I meant to say "following " not preceding. Long = open of first bar following price breaking up through 63MA. First bars penetrates the MA, then I buy the open of the next bar.
MA systems work at best very short term. They typically win 33% of the time and have a 1.2 profit factor. You could instead of having different inputs for the long and short signal merely have a trend filter. I know it has been asked several time, do you have a backtest report?
Yes, it is optimized. I started with 6-month back to present. Then took out the top few trades by narrowing down the optimization range. Increased to 1 year back, re-optimized, etc. ANd again at 2 years back. How would one "test the sensitivity of the MA lengths and entry bar parameters?"
If anyone wants some documentation, please just ask. I have covered what I think to be my bases. But your objective opinions are why I am here ;-) I use Tradestation, so give me some time to clean up the report. Default report is huge. EliteThink I realize that many different strategies may improve this system, including trend filters. However, with all due respect I am not trying to build a perfect system. I want to know if a system developed via backtesting that shows positive results can make it in the real world. I specifically picked a system that I was not too comfortable with. I expect it to have flaws. regardless, it it profitable on paper. Will it work????
I don't mean to put words in his mouth (not that he'd let anyone do that regardless), but I think Jack is telling you that the lookback period of the MAs does not correspond approriately with the range over which your average trade lasts. Or something like that. Let me know if I'm correct in that assessment so I know if I'm getting closer to understanding Mr. Hershey. Beyond that, another factor about BTs is that it has to also do with what equity you're BTing. It may look wonderful on one group, and disastrous on another, and has nothing to do with the system, but has all to do with that particular equity, equities or one trade out of a 100, in the history. So, watch out - BT can become BS!
Because of the optimization...I fear this system may be too curve-fitted to perform well in the future. I like to see systems that still work well over time with symmetrical Entries/Exits. That's just my humble opinion. Good luck!
Good point. Most of the systems I've come up with short more aggressively than long. Is this because of market trend or maybe markets fall faster than they rise?
I don't know about optimizing parameters but I think it's pretty hard to come up with a optimized system to work in real life. I'm sure it can be done. Good Trade. Trend
A robust system should function approximately the same if the parameter values are changed within a fairly broad range. For example, a 60 bar MA system would be expected to work about the same if the value used was 50 bars or 70 bars. If a system is highly sensitive to changes in values, it is a sure sign of curve fitting. If I were you, I would test the system on sample chunks of data going back 10 years or so. You said you optimized over the last two years, which was a rather unusual period in the stockmarket. Also, you didn't say if you tested over other periods, but I'm assuming you did not.