Strategy Fitness Test
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Strategy Fitness Test


NinjaTrader

Created April 24th 2010 by Zach b
Updated April 29th 2010 by darthtrader3.6
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Strategy Fitness Test

  #11 (permalink)
NV
 
Trading Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: fx
 
Posts: 21 since Mar 2010
Thanks: 18 given, 11 received

Merging Contracts

Well luckily for me I do not know how to merge contracts and so all of my studies came from a single cl contract which should lend to it being robust since it tested well on all the others. On the downside, since then I have tried to install the continuous contract you have posted and it said "unexpected number of fields in line 1 " so I do not know how to get a singe result set to post for you to review. Any ideas RE the Error?

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  #12 (permalink)
NV
 
Trading Experience: Intermediate
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piersh View Post
it's my opinion (for what it's worth) that it's as hard to develop a good metric with which to evaluate an automated strategy as it is to develop the strategy itself. it's also much more important to have a good metric than to have a good strategy - without a good metric you cannot know whether or not the strategy you have is any good.

the problem is that you have to find some function that takes into account all the various characteristics of your strategy's performance:
- expectancy
- draw-down
- cumulative profit
- cumulative/contiguous risk
- resilience to changes in market conditions
- etc..

... and it has to represent all of that all in a single number. but how do you weigh the various values with respect to each other?

i'd love to see some more discussion on what people consider to be a good measure of an automated strategy. and, no, for me the sharpe ratio doesn't cut it...

I couldn't agree more. I am trying to apply ideas like risk of ruin but I don't have a clear enough idea as to what data I should use because it speaks in terms of $per an hour.

Mike could please you elaborate on how you go about using StandardDev for risk assessment?

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  #13 (permalink)
Site Administrator
Manta, Ecuador
 
Trading Experience: Advanced
Platform: My own custom solution
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piersh,

I primarily use expectancy plus heavily weight the number of trades and total sample size and then factor that into the total net profit for my custom fitness test.

Zach,

I am not math wizard, in fact quite the opposite. But I believe the general principal of the built-in standard deviation tests inside MultiCharts is that they use the total sample (trades) and compute the standard deviation from one trade to the other, then you can use that as a basis for formulating the standard deviation of the entire test set. I am the wrong person to ask when it comes to math stuff, I rely on trial and error or written examples from people smarter than me...

Mike

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  #14 (permalink)
NV
 
Trading Experience: Intermediate
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Posts: 21 since Mar 2010
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Big Mike View Post
piersh,

I primarily use expectancy plus heavily weight the number of trades and total sample size and then factor that into the total net profit for my custom fitness test.

Zach,

I am not math wizard, in fact quite the opposite. But I believe the general principal of the built-in standard deviation tests inside MultiCharts is that they use the total sample (trades) and compute the standard deviation from one trade to the other, then you can use that as a basis for formulating the standard deviation of the entire test set. I am the wrong person to ask when it comes to math stuff, I rely on trial and error or written examples from people smarter than me...

Mike

So have you moved to multicharts from Ninja? Is that something you would recommend?

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  #15 (permalink)
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Zach b View Post
So have you moved to multicharts from Ninja? Is that something you would recommend?

I've moved, yes. I suggest you read:

https://futures.io/platforms-indicators/980-truth-ninjatrader.html

and

https://futures.io/platforms-indicators/2698-multicharts-multicharts-multicharts.html

Then you can better make your own decision as to what is best for you.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member (see why)

Follow me on Twitter Visit my Facebook Visit my futures io Trade Journal Reply With Quote
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  #16 (permalink)
United States of America
 
Trading Experience: Advanced
Platform: NT
 
Posts: 1,149 since Aug 2009


piersh View Post
it's my opinion (for what it's worth) that it's as hard to develop a good metric with which to evaluate an automated strategy as it is to develop the strategy itself. it's also much more important to have a good metric than to have a good strategy - without a good metric you cannot know whether or not the strategy you have is any good.

the problem is that you have to find some function that takes into account all the various characteristics of your strategy's performance:
- expectancy
- draw-down
- cumulative profit
- cumulative/contiguous risk
- resilience to changes in market conditions
- etc..

... and it has to represent all of that all in a single number. but how do you weigh the various values with respect to each other?

i'd love to see some more discussion on what people consider to be a good measure of an automated strategy. and, no, for me the sharpe ratio doesn't cut it...

I'd say a profit factor of 2:1 would seperate a very good system from most others. Next, I'd examine the drawdowns which as BM pointed out gets into ones personal risk thresholds rather than having a single number which is good or bad, but needlesss to say, the lower the better.

Also, for those who are using NT, don't forget that backtest results must be COBC =True to have an iota of relevance in your analysis.

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  #17 (permalink)
Australia
 
Trading Experience: Intermediate
Platform: NT
 
Posts: 106 since Apr 2010
Thanks: 48 given, 84 received

All good points here. I'de add as a side note, that if you backtest on tick data (and you should) then you mostly likely will need to forward test and go live on that same tick data source. Tick data is normally different from different sources and it may affect the way your strategy performs (well depending on the strategy).

Also I'de say at least 2 years of tick data, more is better, but Ninja hates many years of tick data, even in NT7. Also many years of data is also hard to come by, hard to load and test with. By going back several years you are covering more market conditions, and the more conditions in the past your strategy handles, the more in the future it is likely to be able to handle (it is more robust).

The other thing is that 2008 was the 'GFC' (or whatever they call it) and this presents some fairly unique conditions, some strats love it, some don't, but it is often hard to have an optimal strategy running through that period and also the current period. If you need to do any optimizing (for example for price targets and stops), I would run it on 2009-10 then run the desired variables through 2008 and make sure 2008 comes out ok also (kind of like a walk back test). Trading in 2008 was like surfing Pipeline, but now the surf is flatter, so there is less momentum and I think you really need to reflect the current conditions for optimization. Maybe some don't agree, just my thoughts.

Also watch out for unusually smooth equitity curves and profit factors higher than about 1.5. When I see that I start to get suspicious ... if it's too good to be true .......

I optimize for min DD, and then look at the list of min DD's and look for the best compromise between DD and profit. Look for the number of consequtive loosers, look for the longest period where you won't make a cent, can you handle a week of loosers, can you handle 3 months of sideways equitity curve. Put the equitity graph on a big wide monitor so you can really see the dips and DD's. A small equitity graph can make a lot of pain and wheelspin look fairly insignificant.

Next I run it on market replays (a NT thing) and check that matches the backtesting results. Then I'll take it live and hope for some immediate postive results to buffer me from the first DD.

Finally I make sure that it has the best chance to continue run in the future ... ie don't go posting it on public forums. Don't do the market the favour of feeding it food to become efficient with.

Have fun !


Last edited by webart; April 26th, 2010 at 02:40 PM.
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  #18 (permalink)
wny
 
Trading Experience: Intermediate
Platform: ninja, excel
Favorite Futures: YM, equities
 
darthtrader3.6's Avatar
 
Posts: 86 since Jan 2010

One of the few nuggets of wisdom I've ever found online from Jim Simmons is that after everything has been passed through their teams of Phd's, the final question rentech asks themselves is "does this make sense?".
He didn't say anything more than that but I take that to mean does it make sense that they are exploiting some market property and not just falling into data snooping bias and spurious correlation but done from a speculative, non quantitative common sense perspective.
If you get some outrageous profit factor on a simple model you really need to first ask yourself if it makes sense...
You can make the arguement that any system who's next trade will be EV+ within your risk management you should trade, no matter how small the profit is. Obviously you want though a model that is going to have a life span but nothing is going to help you there beyond your own speculative common sense and skill.

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