All strategies backtested on the E-mini S&P from Jan 2008 to now. Trade 1: Profit factor 1.4 882 trades Percentage profitable 63.76% (535-304) (43 Even trades) Average Trade $32.77 Average win: $187.99 Average loss: $235.77 Trade 2: Profit Factor 1.46 724 Trades Percentage profitable 59.5% (377-256). (91 Even trades) Average Trade $20.82 Average win: $126.23 Average loss: $127 My concern is that there aren't enough trades, given this is almost a 10 year period. This is also only trading the long side of the market. I'm thinking I would have to compensate for lack of trades with more contracts. I'm curious your guys thoughts. Thanks
You're out of your mind. This is an almost 11 year period, and you are losing money (or barely BE). Your backtest sux ass. Dump your plan and try something else. Good lord.
I'd say in general, you want to aim for a strategy where you make money more often than you lose money and the average win is larger than the average loss. You also want to back test using worst case. Taking offers and hitting bids so the results are conservative. Don't forget to add variable and fixed costs. Nothing wrong with an automated strategy that does not trade a lot if it wins a lot. You will need to find other strategies to fill in. I know a hedge fund that runs around 20 to 25 at any one time. If they don't set up, they don't trade. They are always testing new ones.
The RR is to low for my taste, I would not trade anything less than 1:3 or 1:2.5 With a low RR like that, you will get in trouble then the system hit a longer sequence of losses and your "Percentage profitable" (win/loss ratio) drops to 40-50%. With a ratio of 3:1 you will still be breaking even at 45% wins and not losing any money.
Sample size way too low, "Even trades" are always losses as you will get slippage on some of them and commissions due add up big time especially since you making $20-32 bucks, fees are 12-20% of your profitable trades, and are average trade net or you still have to reduce the fees? I do automation scalping and the profits are right on area I average, but am doing 14-120 trades per day. When the ave trade is so low, you losing percentages have to be like 15% and lower as your ave loss can mean you might have losses far larger. Now nothing wrong with protective stops being large-don't want to get stopped out on noise, providing your losing percentages are very tight. Don't know your timeframe, but consider doing off hourly charts where your targets at least double to losses, use method of "even trades" are really plus one tick so it covers fees and pays you lunch, let others pay for you to play and really does add up. Systems of Support/Resistance where you waiting for price to come to your area offer small risks and very healthy profits. None or one indicator and trendlines, plus couples chart patterns like H&S after extended move or triple/quad bottoms and tops. Often times best set-ups are counter-trend after fast move in one direction. Down-sloping trend lines off highs to sell and up-sloping trend lines and wait for price to get there for the bounce after fast market conditions, price either holds or reversals quickly. Risk can be 3-5 points, consider trading 2 lots where one taken off at five points and trail 2nd on 3/5 minute timeframe. You can trade futures like ES or trade options on futures long only or Debit spreads, once you get your losing percentages down, increase size.
Do you automate trend lines or draw them yourself? To clarify, you suggest looking for entries on the hourly chart and then a trailing stop for the second lot on the 3/5 minute? Using something like price crossing over a moving average? Thanks (what profit factor do you try and have at a minimum?) I thought at least around 1.5 would be okay, but it sounds like you are saying that's low.
I have a quick question. If I back test $100,000 account and my Profit Factor 1.46, what is my expected profit over the tested period? What is my expected monthly return? How can I calculate that from the numbers above?
This is my process for evaluating a futures strategy: For each $100,000 in an account: Monthly Average returns Daily variations Worst Drawdown % of SPAN Margin requires for DT and Overnight Average yearly RT per $100,000 The above calculated including all costs and fees With that, I can have an opinion as to if it looks good to me and follow that up with other questions. This is what I do when I evaluate CTAs although the Daily variations are often not available.