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Just to be perfectly clear, the backtest is correct. It does not give "false" results. The results may not reflect what you wanted to actually backtest, but that is not the backtest software's fault.
I mention this because having faith that backtest results are correct is crucial to gaining confidence in developing and testing systems. This confidence will come with time, as you discover the many quirks of trading software.
Also, if you want to test entries, to see if a setup is valid, simply try exiting after 1, 2, 3, etc. bars after entry. You'll see if the entry is good or bad, and you'll see if you are early or late in trades.
Once you get more adept at developing systems, you could also exit after X bars, where X is chosen at random. Run it enough times, and you'll get some statistics on how good your entry is.
NT backtesting is a waste of time, unless your system is using large time frames, we are not even backtesting any more as nt only uses last price, and orders are placed the the next bar from the one in which the order was generated. we are looking to extending a backtesting engine or writing our own, we have not yet settle on a solution.
"Learning to Trade: The Cost Of Tuition"
- a roadmap of my lessons learned as taught by the market
Disagree. My guess is you are using the software incorrectly, or in a manner for which it was not designed. It is easy to fool a backtest engine, but when used properly, backtesting can be very accurate.
we used to have a strategy that used 10 bars, the backtest and live trading would match up 98% of the time, that was with nt 6.5, which as far as i know was the same becktest engine as nt7.
we are now using subminute time frames the backtesting and live testing now no longer match, not even close.
Signals are sent on the next bar that is a large lag in the subminute world. nt7 only uses last price in backtesting ask and bid is not available. which is a issue, because then you could write your own fills depending on if either touch your order.
"Learning to Trade: The Cost Of Tuition"
- a roadmap of my lessons learned as taught by the market
Gotcha. But that doesn't mean backtesting is a waste of time. There are limits to what any software tool can do, and you likely may have run up against one. Another platform might eliminate your issue, or maybe adjusting your strategy to again match backtest results is the solution.
if we had access to behind the curtain in nt it would not be an issue, but we do not, we have looked at other platforms as well (but our trading tools and system are in c# so any move is limited to this lang or some funky work around) and they are all the same, tradelink looked promising but once we looked at the code it is mainly hardcoded so it has limited use. we are looking into qusma stuff, which we do not have to start of ground zero.
my cousin just released his own programming language you can think of it like easy language but with the full power of .net behind it.
essencesharp.codeplex.com
"Learning to Trade: The Cost Of Tuition"
- a roadmap of my lessons learned as taught by the market
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