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If the past isn't indicative of the future, why do people back-test?


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If the past isn't indicative of the future, why do people back-test?

  #11 (permalink)
 
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 DavidHP 
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I just saw an article by a Futures.io member, @kevinkdog

Here is the link
Did nostradamus trade futures?

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  #12 (permalink)
Ozquant
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" If the past isn't indicative of the future, why do people back-test? "


IF you dont believe that patterns repeat , market inefficiencies exist , that markets arent driven by human psyche and that markets are not random cease backtesting NOW . Leave it to those who do beleive that , you just keep doing what you do , hell if its working dont change a thing . Good luck with that and in the mean time i will just keep doing what i do

Patterns dont repeat and markets are totally random , why do we even bother







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  #13 (permalink)
jsk123
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patterns do repeat...

it was said to "ground" general public expectation...

the end...

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  #14 (permalink)
JackWolfson
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The question is how much history and how you use it.

One side of that is to use enough samples the other side is to "limit the memory" in order not to use unrelevant samples.

I am using correlation and backtesting tools that help me to make this balance.

Hope that it's helpful somehow to you.

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  #15 (permalink)
 GFIs1 
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you need to flip a coin for every entry and or exit.

As a consistent trader you need to have some system that works with YOUR instrument.
Quite some time to find such. Not a holy grail though.

From my side I am a pattern trader with often repeated patterns in the market.
This gives me some security to take a trade or to not take it.
For this I am optimizing my stops to get the most out of a trade and not hang in with false direction.

There are many patterns to find in the trading - just look back and test some out for the best wins.

A pretty example is my "Walzer" that gives a high probable positive return on most of the trades.
That one you can backtest or use it for yourself - the rules are in the first post of that thread here:


To be clear - the goal is to grow your account(s) - time is not important but consistency!

GFIs1

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  #16 (permalink)
 kanepa 
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Zachary Standley View Post
Is back-testing really necessary to develop a consistently profitable trading strategy?

With that being asked, I went way back in time on the ES and noticed little volume and volatility- compared to now at least. 20-40 point range of movement in a day, if even. Within the past couple of years though, volume and volatility are at an all time high. Is there any merit in going back in time (like 2004-2012), where market conditions were obviously different (climbing bull market for the most part) to determine credibility of a strategy? Has anyone here pondered deeply about the utility of back-testing in general?

If you think back-testing is absolutely necessary, please explain why. Maybe the past actually is indicative of the future to some degree. I just want more information on this.

I think they are necessary because it can prepare me to have a set risk for certain strategy. Also provides information about what to be expected in Low/Mid/High volatility level of market.

But to be able to design a consistently profitable strategy will be a very difficult process as the strategy has to adapt to current market situation as you have mentioned above.

Going back as far as you can has a merit. It shows you how the system did in certain condition. 2001 2002 bear market, 2003 bouncing off hard until 2008. large move down in 08 and 09 then shooting up until recent month. To see how they performed can be beneficial to your analysis.

It is my experience but it was impossible for me to design 1 system which will make consistent profit regardless of market condition and volatility.

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  #17 (permalink)
tolyadzn
Berlin
 
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How about intraday Strategies?
Which Period would you use for backtesting?


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  #18 (permalink)
Ozquant
Brisbane Queensland Australia
 
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GFIs1 View Post
To be clear - the goal is to grow your account(s) - time is not important but consistency!

GFIs1

The more frequently you can trade accurately the better naturally to get that speed of curve which is the object of the 'grail' . I set the bar high and try to outperform the market by multiples whilst keeping RAR better than market metrics


kanepa View Post

It is my experience but it was impossible for me to design 1 system which will make consistent profit regardless of market condition and volatility.

That 'one ' system needs to be an amalgam of several systems to get profitability in most market conditions with a filter/s to switch between said conditions . 2017 grindy low volatility uptrending market to the high volatility chaotic market of 2018 and the conditions inbetween . FWIW i structurally breakdown market conditions and build complete systems for each definable market type and switch em up mechanically as market changes . Over xmas i am refining these systems currently . By their very nature these systems get quite complex and its a challenge to keep em simple without losing efficacy . lots of 'if' , 'else' ' elseif ' 'or' involved ... volatility and momentum are leading indicators and therefore are a huge part of my systems


tolyadzn View Post
How about intraday Strategies?
Which Period would you use for backtesting?

As much as possible if you are chasing systems to do as described above . Of course you can re optomize and reconstruct systems if you are not attempting a one does all type system so it depends on what you are defining as your objective . I like to define my objectives with a set of bullet points and tick em of one at a time breaking things down structurally before ' bolting ' them all together .

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  #19 (permalink)
 kanepa 
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Ozquant View Post

That 'one ' system needs to be an amalgam of several systems to get profitability in most market conditions with a filter/s to switch between said conditions . 2017 grindy low volatility uptrending market to the high volatility chaotic market of 2018 and the conditions inbetween . FWIW i structurally breakdown market conditions and build complete systems for each definable market type and switch em up mechanically as market changes . Over xmas i am refining these systems currently . By their very nature these systems get quite complex and its a challenge to keep em simple without losing efficacy . lots of 'if' , 'else' ' elseif ' 'or' involved ... volatility and momentum are leading indicators and therefore are a huge part of my systems

Hi, Ozquant.

Thank you for letting me know that I am not the only one who is spending good amount of hours researching and analyzing my system on Christmas day.

I absolutely agree with your comment but at this time, my skill level is rather low to come up with such a strategies. So, Instead of complex strategies to adapt and trade a all market condition, I only have a strategies to trade a certain condition of the market. But working towards to have such strategies to employ.

Which volatility and momentum indicators do you find most helpful?

Thank you,
Kanepa

Merry Christmas

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  #20 (permalink)
Ozquant
Brisbane Queensland Australia
 
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kanepa View Post

Which volatility and momentum indicators do you find most helpful?

Thank you,
Kanepa

Merry Christmas

I have written all of my own volatility and momentum indicators but ATR is a decent enough vol indi and momentum is not much more than range over time , although i like to measure bullish and bearish momentum totally independent of each other and over a multi periods . I think the key to any indicator is too normalize them and many generics dont meet this condition . Changes in trend and speed of trend have patterns in momo and vol that repeat and as such can give a 'tell' to what happens next . Highs and lows have different aspects that are not neccesarily inverse to each other and need to be treated accordingly . Its actually the day after Xmas here in Australia atm , early afternoon

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Last Updated on December 28, 2018


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