Absolute vs. percentage price change in backtesting | Traders Hideout

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Absolute vs. percentage price change in backtesting

  #8 (permalink)

North Carolina
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
Posts: 644 since Nov 2011

Most futures contracts need to be tested in ticks because of back adjustment. This is not perfect. There is also a percentage back adjusted contract that is not common. Actually, I think it applies to any type of division. However, the ticks/points is not ideal either because percentage change is more likely to be robust when applied to an underlying. For example, today a 2% move on something like ES is going to be larger in points/ticks then several years ago. The nominal value changes over time.

The only real solution is to develop on the cash when possible, re-optimize, and/or test to see if your case matters. A rolling optimization is probably the easiest way to handle as it will help deal with the nominal value change which is slower. However, it won't handle certain types of changes.

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